<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION Washington, D.C. 20549
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- - - - - - - - - ---- ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended January 1, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - - - - - - - - ---- EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from to
--------------- --------------
Commission file number 0-1790
RUSSELL CORPORATION
(Exact name of registrant as specified in its charter)
Alabama 63-0180720
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 Lee Street
Alexander City, Alabama 35010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 329-4000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
------------------- ---------------------
Common Stock, $.01 par value New York Stock Exchange
Pacific Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been subject
to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
The aggregate market value of Common Stock, par value $.01, held by
non-affiliates of the registrant, as of March 9, 1994, was approximately
$841,000,000.
As of March 9, 1994, there were 39,683,165 shares of Common Stock, $.01
par value outstanding (excluding treasury shares).
-Continued-
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Shareholders Report for the year ended January
1, 1994 are incorporated by reference into Parts II and IV.
Portions of the Proxy Statement for the Annual Meeting of Shareholders
to be held on April 27, 1994 are incorporated by reference into Part III.
<PAGE> 3
PART I
ITEM 1. Business
GENERAL
Russell Corporation (together with its subsidiaries, the "Company") is
a vertically integrated international manufacturer and marketer of activewear,
licensed sports apparel, athletic uniforms, better knit shirts, and a
comprehensive line of lightweight, yarn-dyed woven fabrics. The Company's
manufacturing operations include the entire process of converting raw fibers
into finished apparel and fabrics. Russell's products are marketed through
three sales divisions--Athletic, Knit Apparel and Fabrics--as well as through
Cross Creek Apparel, Inc., Russell Corp. UK Limited and The Game Inc., three
wholly owned subsidiaries. Products are marketed to sporting goods dealers,
department and specialty stores, mass merchandisers, golf pro shops, college
bookstores, screen printers, distributors, mail-order houses, and other apparel
manufacturers. There was no material change in the nature of the business
conducted by Russell Corporation during 1993.
Of the Company's total revenues, more than ninety percent are derived
from the sale of completed apparel, with the balance from woven fabrics.
During the two previous fiscal years ending January 2, 1993 and January 4,
1992, completed apparel accounted for more than ninety percent of total
revenues. Foreign and export sales for 1993 and each of the immediately
preceding two years were less than ten percent of total net sales. One
customer, Wal-Mart Stores, Inc., accounted for 16.1 percent of total revenues
in 1993 and 12.9 percent in 1992. No single customer accounted for more than
ten percent of total revenues in 1991.
The Company produces athletic uniforms for most recognized sports
activities and for players of all ages and sizes. These products are marketed
to professional, collegiate, high school and other teams as well as to
individuals. Knit apparel, such as T-shirts, fleece sweatshirts and
sweatpants, pullovers, jackets, and other similar knitted products, is produced
for the general consumer market. Knit product lines also include knit placket
shirts, rugby-styled shirts and turtlenecks. Woven fabrics are produced and
sold to other apparel manufacturers for men's, women's and children's wear.
The Company's principal manufacturing facilities are located in and
around Alexander City, Alabama. It also operates 34 additional plants in other
communities in Alabama, Florida, Georgia, North Carolina and Virginia.
Warehousing and shipping is conducted in Alexander City, Dothan and Montgomery,
Alabama; Marianna and Miami, Florida; Mt. Airy, North Carolina; Columbus and
Snellville, Georgia; Chicago, Illinois; Sparks, Nevada; and Palisades Park, New
Jersey. The primary manufacturing and distribution facilities for Russell
Corp. UK Limited are located in and around Livingston, Scotland. The Company
also maintains warehouses in Mexico City and San Juan del Rio, Mexico.
As a vertically integrated operation, the Company converts raw fibers
into finished apparel and fabrics utilizing company-owned spinning mills,
knitting and weaving equipment, dyeing and finishing facilities, and cutting
and sewing operations. Generally, the Company produces most of the yarns,
other than textured and filament yarns, used in the manufacturing process. As
a result of its integrated production process, substantially all functions
required to produce finished apparel and fabrics can be performed by the
Company without reliance upon outside contractors. The Company does, however,
rely on outside suppliers for caps and certain licensed sports apparel
products.
I-1
<PAGE> 4
The Company benefits from flexibility in its production scheduling
capability, permitting it to shift product emphasis as markets improve, change
or temporarily decline for particular products. This ability to respond
quickly to market changes has enabled the Company to manage more effectively
the utilization of its manufacturing capacity.
The Company's revenue and income are subject to minor seasonal
variations. However, due to the time which may elapse between the placement of
orders and shipment of goods, prices may or may not immediately reflect changes
in the Company's cost of raw materials and other costs. Working capital needs
may change with the increase or decrease in inventories or accounts receivable
as a result of a variety of credit terms and time between production and
shipments. Production schedules are based upon current orders, the history of
customer orders, market research, and similar factors. The Company has no
meaningful backlog figures.
The Company does not hold any significant patents, franchises or
concessions. The Company's ability to manufacture and sell licensed apparel
products is dependent upon licenses held by the Company to utilize various
trademarks and tradenames on such apparel. These licenses are subject to
periodic renewal and negotiation and certain minimum payments.
MANUFACTURING
The Company has the capability of converting raw fibers into finished
products in major production complexes which are complemented by several
satellite production facilities in the same geographic areas. The Company
emphasizes the utilization of technological advances and devotes a major
portion of its capital expenditure program to keeping its manufacturing
machinery and equipment modern and efficient.
The total process includes spinning of yarn from cotton and blends of
cotton and man-made fibers such as polyester; fabrication of knit and woven
fabrics; dyeing, bleaching, screen printing and otherwise finishing those
fabrics; and manufacturing finished apparel in various cutting and sewing
operations. These operations are discussed below:
Yarn Manufacturing - The spinning of yarns, the process by which fibers
of raw cotton and blends of cotton and man-made fibers are converted into
continuous strands, is a key operation in the manufacturing process. Yarn
uniformity and strength are the principal characteristics which materially
affect the efficiency of subsequent manufacturing processes and the quality of
the finished fabrics or apparel. The Company manufactures a variety of yarn
sizes for various end uses.
The Company purchases synthetic fibers from one principal supplier.
There are approximately four major producers of such fibers in the United
States. The Company purchases cotton, primarily grown in the Southeastern
region, from various cotton merchants. The Company also purchases all of its
requirements of filament and textured yarns from other manufacturers. The
Company has experienced no material difficulty in purchasing adequate supplies,
and does not presently anticipate any difficulties in the future. The Company
has no long-term contracts for the supply of raw materials and is, therefore,
subject to market price fluctuations.
I-2
<PAGE> 5
Fabrication - The yarns described above are converted by the Company
into cloth or fabrics through the processes of single knitting, supplemented by
smaller operations of weaving, double knitting and warp knitting. These
operations are conducted in four plant locations in Alexander City.
Fabrication facilities for Cross Creek are located in Mt. Airy, North Carolina.
Similar fabrication facilities in Livingston, Scotland, service Russell Corp.
UK Limited.
Dyeing and Finishing - Fabrics described above are either used in the
production of the Company's own apparel or sold to others. These fabrics are
dyed and finished in company-owned facilities in Alexander City and Sylacauga,
Alabama; Mt. Airy, North Carolina; and Livingston, Scotland. Yarn-dyed fabrics
are dyed in the yarn manufacturing stage. The dyeing and finishing processes
impart and affect the appearance, the hand (feel), colorfastness, uniformity,
shade, and stability (retention of shape and form) of the fabric.
Cutting and Sewing - The Company's cutting and sewing operations are
currently located in 30 plants in the U.S. and two plants in Scotland which
serve its apparel marketing operations. The Company employs an engineering
staff to assist in the design and development of new equipment to improve
efficiencies and automate production facilities in the cutting and sewing
operations which historically have been characterized by high labor costs.
The Company places a major emphasis upon maintaining sufficient modern
cutting and sewing equipment, thereby providing flexibility to accommodate
changing patterns, styles and designs of its apparel products.
MARKETING
Athletic Division - RUSSELL ATHLETIC produces and markets high-quality
teamwear and knit activewear through distribution partners including sporting
goods dealers, specialty stores, department stores, sporting goods chains,
college bookstores, and major mail-order catalogs. Sales are made by Company
employees.
The Company has a dominant position as a supplier of team uniforms, providing
practice and game uniforms for both professional and amateur participants of
almost every major sport. Russell is the "official" supplier of team uniforms
for 24 of 28 Major League Baseball teams and outfits more NFL teams than any
other company. The Company believes it is the largest manufacturer of athletic
uniforms in the United States.
Activewear such as sweatshirts, sweatpants, T-shirts, and tank tops are also
sold under the RUSSELL ATHLETIC label. The Company merchandises the RUSSELL
ATHLETIC line in product categories such as NuBlend, HIGH COTTON, and PRO
COTTON.
RUSSELL ATHLETIC is a leading producer and marketer of quality licensed sports
apparel, selling its products under licenses granted by Major League Baseball,
the National Football League and most major colleges and universities. The
Company has the exclusive rights to market authentic game jerseys under Major
League Baseball Properties' Authentic Diamond Collection.
I-3
<PAGE> 6
The Company furnishes most of its own yarn and fabric used in this division and
also supplements its requirements with purchases from outside suppliers. The
uniforms are manufactured in a wide variety of styles, fabrics and colors, with
lettering and numerical arrangements available to customers' specifications.
Knit Apparel Division - Under the JERZEES label and private labels,
this division designs and markets a wide variety of knitted apparel, including
fleece sportswear, such as sweatshirts and sweatpants, and lightweight
sportswear, such as T-shirts and tank tops for children and adults. The Company
signed an exclusive licensing agreement in 1993 to introduce a line of women's
and girls' activewear under the chic(R) brand name in the United States.
The apparel is sold by a salaried, company-employed salesforce to distributors,
screen printers, mass merchandising chains, and other retail outlets. The
Division maintains sales offices in Alexander City, Alabama; New York, New
York; Irving, Texas; Norcross, Georgia; and Irvine, California.
Fabrics Division - The Fabrics Division designs and markets quality
woven fabrics of cotton and blends of cotton and man-made fibers in a wide
variety of patterns, colors and constructions for sale primarily to other
manufacturers of apparel. Most of the woven fabrics are made with dyed yarns
to produce fabrics to meet customer specifications. A fabric screen printing
operation also permits color printing of woven fabrics, thereby providing a
more diversified product line. Sales are made by the Company's own marketing
staff from its Alexander City, Atlanta, Los Angeles, and New York sales offices
and also by commission sales representatives located in Dallas, New York and
Toronto.
The Division's expertise in finishing plain-woven fabrics is also
utilized in a contract finishing operation where customer-owned fabrics are
finished, or printed and finished, on a contractual basis.
Cross Creek Apparel, Inc. - Cross Creek designs and markets better knit
apparel including placket shirts, turtlenecks and rugbys. The CROSS CREEK PRO
COLLECTION, designed specifically for golfers, is sold in golf pro shops and
resort areas. The CROSS CREEK retail line is distributed through department
stores and men's specialty shops. The CROSS CREEK COUNTRY COTTONS line of
placket shirts is marketed through national distributors to screen printers and
embroiderers. CROSS CREEK also manufactures private label apparel for high-end
catalogs and other retailers. In addition to commission agents, Cross Creek
maintains a company-employed sales force with offices in Mt. Airy, North
Carolina and New York, New York.
Russell Corp. UK Limited - Russell Corp. UK Limited is a vertical
operation (starting with purchased yarn) which manufactures and markets fleece
garments and T-shirts for sale primarily in the United Kingdom, and also
throughout Europe. These products are similar to those produced by the Company
in the U.S.
The Game Inc. - The Game Inc. became a wholly owned subsidiary of
Russell Corporation on December 23, 1993. Located in Midland, Georgia, THE
GAME is a wholesale distributor of high-quality, licensed collegiate and
professional caps and apparel. THE GAME is a licensee of the National
Basketball Association, the
I-4
<PAGE> 7
National Football League, Major League Baseball, the National Hockey League,
World Cup Soccer, the National Collegiate Athletic Association, and the
Olympics. In addition, THE GAME produces licensed goods bearing the logo of
more than 100 U.S. colleges and universities.
These products are sold through national sales representatives to retailers
across the nation. Distribution channels include specialty footwear stores,
department stores, superstores, licensed product specialty stores, full-line
sporting goods stores, bookstores, concessionaires, and souvenir and gift
stores.
Other - The Company also has sales offices in Alicante, Spain;
Brussels, Belgium; Frankfurt, Germany; Mexico City, Mexico; Paris, France;
Prague, Czechoslovakia; and Prato, Italy.
COMPETITION
The textile-apparel industry is keenly competitive, and the Company has
many domestic and foreign competitors, both large textile-apparel companies and
smaller concerns. While the sales of a number of manufacturers are
substantially greater than those of the Company, no single manufacturer
dominates the industry.
EMPLOYEES
As of January 1, 1994, the Company had 16,640 employees. The Company
has never had a strike or work stoppage and considers its relationship with its
employees to be good.
REGULATION
The Company is subject to Federal, State, and local laws and
regulations affecting its business, including those promulgated under the
Occupational Safety and Health Act (OSHA), the Consumer Product Safety Act
(CPSA), the Flammable Fabrics Act, the Textile Fiber Product Identification
Act, and the rules and regulations of the Consumer Products Safety Commission
(CPSC). The Company believes that it is in substantial compliance with all
applicable governmental regulations under these statutes. The Company has
complied with all known current environmental requirements and expects no major
additional expenditures in this area in the foreseeable future.
PROPOSED ACQUISITION
Subsequent to year-end 1993, Russell Corporation announced the signing
of a definitive agreement for the acquisition of DeSoto Mills, Inc., a
finisher/manufacturer of popularly priced socks for men, women and children.
This
I-5
<PAGE> 8
stock transaction, valued at approximately $10,000,000, will result in DeSoto
Mills, Inc. being operated as a wholly owned subsidiary of Russell Corporation.
The acquisition is scheduled to close on April 1, 1994.
Located in Ft. Payne, Alabama, Desoto Mills sells sports and casual
socks under the brand names of DeSoto Players Club, Athletic Club, Performance
Club, and Player Performance. Socks are also sold to private label customers
and under licensing agreements such as Faded Glory, Beverly Hills Polo Club and
Hytest. Sales are made through a Company-employed sales force principally to
the wholesale club market and to discount retailers.
ITEM 2. Properties
The Company's principal executive offices, manufacturing plants and
research facilities are located in Alexander City, Alabama, with additional
plants in Alabama, Florida, Georgia, Nevada, North Carolina, Virginia and (in
and around) Livingston, Scotland. The Company has no material mortgages on any
of its real property or manufacturing machinery except for capitalized lease
obligations (see Note 3 of Notes to Consolidated Financial Statements), and
believes that all of its properties are well maintained and suitable for its
operations and are currently fully utilized for such purposes.
The Company utilizes an aggregate of approximately 8,750,000 square
feet of manufacturing, warehousing and office facilities. The following table
summarizes the approximate areas of such facilities:
<TABLE>
<CAPTION>
Approximate
Primary Use Square Feet
----------- -----------
<S> <C>
Spinning 1,552,500
Knitting and Weaving 777,700
Dyeing and Finishing 690,700
Cutting and Sewing 2,012,600
Warehousing and Shipping 2,669,300
Retail/Outlet Stores 118,600
Executive Offices, Maintenance
Shops and Research and
Development 513,400
Scotland 380,100
Mexico 35,100
</TABLE>
All presently utilized facilities in the U.S. are owned,
except the Montgomery and Greenville, Alabama, sewing plants; Columbus,
Georgia and Sparks, Nevada distribution facilities; several regional
warehouses; the regional sales offices; and the majority of the outlet/retail
store locations (see Notes 3 and 9 of Notes to Consolidated Financial
Statements).
ITEM 3. Legal Proceedings
The Company is a party to various lawsuits arising out of the conduct of
its business, none of which, if adversely determined, would have a material
adverse affect upon the Company.
I-6
<PAGE> 9
ITEM 4. Submission of Matters to a Vote of Security Holders
None
EXECUTIVE OFFICERS OF THE COMPANY
"Election of Directors" on pages one through four of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 27, 1994 is
incorporated herein by reference.
Additional executive officers who are not directors are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Since Position
---- --- ------- --------
<S> <C> <C> <C>
Fred O. Braswell III 38 1992 Vice President-External
Affairs
Steve R. Forehand 38 1987 Secretary
Thomas R. Johnson, Jr. 51 1989 Executive Vice President-
Manufacturing
J. Anthony Meyer, Jr. 44 1991 Treasurer
W. J. Spires, Jr. 48 1988 President - Cross Creek
Apparel, Inc.
JT Taunton, Jr. 51 1983 Executive Vice President-
Sales and Marketing
Larry E. Workman 50 1987 Controller
</TABLE>
Mr. Braswell, employed by the Company in 1992, was Director of the
Alabama Development Office from 1990 until 1992. Prior to 1990, he was Director
of the Alabama Department of Economic and Community Affairs.
Mr. Forehand, employed by the Company in 1985 as Director of Taxes,
served as Assistant Secretary from 1987 to 1988. Prior to joining the Company,
he was engaged in the private practice of law.
Mr. Johnson, employed by the Company since 1989, most recently served
as Vice President, Greige Manufacturing. Prior to joining Russell, he served
as Operations Manager for Eden Yarns, Inc. from 1987 to 1989 and as a Plant
Manager for Avondale Mills from 1984 to 1987. Prior to that, Mr. Johnson was
employed by Chicopee, a division of Johnson & Johnson.
Mr. Meyer, employed by the Company in 1991, was associated with Wachovia
Bank of Georgia from 1979 to 1991 where he was a Senior Vice President. He was
Southern District Manager, Corporate Banking, from 1981 to 1991.
I-7
<PAGE> 10
Mr. Spires, employed by the Company in 1969, was elected President,
Cross Creek Apparel, Inc. in 1993. Prior to that, he served from 1988 to 1993
as Vice President, Services, where he directed the Company's Distribution,
Transportation and Information Services activities. Prior to 1988, Mr. Spires
held several management positions with Russell in both sales and operations.
Mr. Taunton, employed by the Company since 1973, most recently served
as President of the Fabrics Division from 1988 to 1993. Prior to that, he
served as Vice President, Operations and as Operations Manager for the Fabrics
Division.
Mr. Workman, employed by the Company since 1969 as an accountant,
served as Manager of Cost Accounting from 1970 to 1987.
All executive officers and all other officers of the Company are
elected by the Board of Directors and serve at the pleasure of the Board of
Directors.
I-8
<PAGE> 11
PART II
ITEM 5. Market for the Registrant's Common
Stock and Related Security Holder Matters
"Dividend and Market Price Information" on page 27 and in Note 3 to
Consolidated Financial Statements on page 23 of the Annual Shareholders Report
for the year ended January 1, 1994 are incorporated herein by reference.
The approximate number of holders of the Company's common stock at March
9, 1994 was 13,000.
ITEM 6. Selected Financial Data
"Financial Review" on pages 30 and 31 of the Annual Shareholders Report
for the year ended January 1, 1994 is incorporated herein by reference.
ITEM 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" on pages 28 and 29 of the Annual Shareholders Report for the
year ended January 1, 1994 is incorporated herein by reference.
ITEM 8. Financial Statements and Supplementary Data
The following consolidated financial statements of the registrant and its
subsidiaries, included in the Annual Shareholders Report for the year ended
January 1, 1994 are incorporated herein by reference:
... Consolidated statements of income - Years ended January 1, 1994,
January 2, 1993 and January 4, 1992
... Consolidated balance sheets - January 1, 1994 and January 2, 1993
... Consolidated statements of stockholders' equity - Years ended
January 1, 1994, January 2, 1993 and January 4, 1992
... Consolidated statements of cash flows - Years ended January 1, 1994,
January 2, 1993 and January 4, 1992
... Notes to consolidated financial statements - Years ended January 1,
1994, January 2, 1993 and January 4, 1992
... Report of Independent Auditors
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and Financial Disclosure
None
II-1
<PAGE> 12
PART III
ITEM 10. Directors and Executive Officers of the Registrant
"Election of Directors" on pages one through four and "Principal
Shareholders" on pages eleven and twelve of the Proxy Statement for the Annual
Meeting of Shareholders to be held April 27, 1994 is incorporated herein by
reference.
"Executive Officers of the Company" on pages I-7 and I-8 of this report is
incorporated herein by reference.
Other significant employees are as follows:
<TABLE>
<CAPTION>
Officer
Name Age Since Position
---- --- ----- --------
<S> <C> <C> <C>
Fletcher D. Adamson 59 1987 Vice President-Research
William P. Dickson, Jr. 53 1974 Vice President-
Human Resources
J. Franklin Foy 58 1982 Vice President-
Dyeing and Finishing
John E. Frechette 54 1991 Vice President-
International
Jerry W. Green 50 1990 Vice President-
Apparel Operations
K. Roger Holliday 35 1988 President-Knit Apparel
Division
D.W. Wachtel 55 1991 President-Athletic Division
</TABLE>
Mr. Adamson, employed by the Company since 1955, was Director, Machine
Research and Development from 1969 to 1987. He began his career in the cutting
operation for the Athletic Division and was a Supervisor in the division's
sewing operations from 1960 to 1969.
Mr. Dickson, employed by the Company in 1974, was previously Industrial
Relations Manager for the Bibb Company.
Mr. Foy, employed by the Company since 1959, was Operating Vice
President, Dyeing and Finishing prior to 1982.
Mr. Frechette, employed by the Company in 1991, operated J.F. &
Associates from 1986 to 1991. J.F. & Associates provided general management
and marketing consulting with focus on the apparel industry. Prior to 1986, he
was employed by Levi Strauss & Company for 15 years, most recently, as Vice
President and General Manager of the Jeans Division U.S.A.
III-1
<PAGE> 13
Mr. Green, employed by the Company since 1969, has held various
management positions in the apparel operations of the Company. Most recently,
he served as Operating Vice President, Apparel Manufacturing from 1986 to 1990.
Mr. Holliday, employed by the Company since 1986, was promoted to
President of the Knit Apparel Division in 1991. He served as Assistant
Treasurer from 1988 to 1991 and as Director of Financial Relations from 1986 to
1988. Prior to joining the Company, he was employed by Johnson & Higgins from
1980 to 1986.
Mr. Wachtel, employed by the Company in 1976, was promoted to President
of the Athletic Division in 1991. He formed the Mid-South Regional Office in
1980 and formed the Mid-Southeast Sales Office in 1986. He was General Manager
of Russell Athletic, Inc. in Snellville, Georgia from 1989 to 1990 and Vice
President, Sales in the Athletic Division from 1990 to 1991.
"Compliance with Section 16(a) of the Securities Exchange Act of 1934"
on page 13 of the Proxy Statement for the Annual Meeting of Shareholders to be
held April 27, 1994 is incorporated herein by reference.
ITEM 11. Executive Compensation
"Executive Compensation" on pages four through ten of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 27, 1994 is
incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management
(a) "Principal Shareholders" on pages eleven and twelve of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 27, 1994 is
incorporated herein by reference.
(b) Information concerning security ownership of management set forth
in the Proxy Statement for the Annual Meeting of Shareholders to be held April
27, 1994 under the captions "Security Ownership of Management" on page twelve
is incorporated herein by reference.
(c) There are no arrangements known to the registrant the operation of
which may at a subsequent date result in a change in control of the registrant.
ITEM 13. Certain Relationships and Related Transactions
"Transactions with Management and Others" on page thirteen of the Proxy
Statement for the Annual Meeting of Shareholders to be held April 27, 1994 is
incorporated herein by reference.
III-2
<PAGE> 14
PART IV
ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) List of Documents filed as part of this Report:
(1) Financial Statements
All financial statements of the registrant as
set forth under Item 8 of this Report on Form
10-K
(2) Financial Statement Schedules
<TABLE>
<CAPTION>
Schedule Page
Number Description Number
-------- ----------- ------
<S> <C> <C>
V Property, Plant and Equipment IV-4
VI Accumulated Depreciation,
Depletion and Amortization
of Property, Plant and
Equipment IV-5
VIII Valuation and Qualifying
Accounts IV-6
IX Short-term Borrowings IV-7
X Supplementary Income Statement
Information IV-8
</TABLE>
All other financial statements and schedules not listed
have been omitted since the required information is included
in the consolidated financial statements or the notes
thereto, or is not applicable or required.
(3) Exhibits (numbered in accordance with Item 601 of
Regulation S-K)
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation
Numbers Description by Reference to
------- ----------- ---------------
<S> <C> <C>
(3a) Restated Articles of Exhibit (3a) to
Incorporation Annual Report
on Form 10-K
for year ended
December 31,
1988
(3b) Certificate of Adoption Exhibit (3b)
of Resolutions by Board to Annual Report on
of Directors of Russell Form 10-K for year
Corporation dated ended December 29, 1990.
October 25, 1989
</TABLE>
IV-1
<PAGE> 15
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation
Numbers Description by Reference to
- - - - - - - - - ------- ----------- ---------------
<S> <C> <C>
(3c) Bylaws Exhibit (3b) to
Annual Report
on Form 10-K
for year ended
December 31,
1988
( 4) Rights Agreement dated Exhibit 1 to
October 25, 1989 between Form 8-A dated
the Company and First October 30,
Alabama Bank, Montgomery, 1989 Registra-
Alabama tion Statement
No. 1-5822
(10a) Form of Deferred Exhibits 19(a)
Compensation Agreement and 19(b) to
with certain officers Quarterly
Report on
Form 10-Q for
Quarter ended
July 3, 1988
(10b) Fuel supply contract Exhibit 13(c)
with Russell Lands, to Registration
Incorporated dated Statement
May 21, 1975 No. 2-33943
(10c) 1978 Stock Option Plan Exhibit 1 to
Registration
Statement
No. 2-64496
(10d) October 28, 1981 Exhibit 10(i)
Amendment to Stock to Annual Report
Option Plans on Form 10-K
for year ended
January 2, 1988
(10e) 1987 Stock Option Plan Exhibit 1 to
Registration
Statement
No. 33-24898
(10f) 1993 Executive Long-Term Exhibit 4(c) to
Incentive Plan Registration
Statement
No. 33-69679
(11) Computations of Earnings IV-11
per Common Share
</TABLE>
IV-2
<PAGE> 16
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporation
Numbers Description by Reference to
- - - - - - - - - ------- ----------- ---------------
<S> <C> <C>
(13) 1993 Annual Report to IV-12
Shareholders
(21) List of Significant IV-13
Subsidiaries
(23) Consent of Independent IV-14
Auditors
(99) Proxy Statement for IV-15
April 27, 1994
</TABLE>
(b) Reports on Form 8-K
No reports on form 8-K were filed during the fourth
quarter of the year ended January 1, 1994.
For the purpose of complying with the amendments to the rules governing
Form S-8 (effective July 13, 1990) under the Securities Act of 1933, the
undersigned registrant hereby undertakes as follows, which undertaking shall be
incorporated by reference into the undertakings contained in Part II of the
registrant's registration statements on Form S-8 numbers 2-64496 and 33-24898:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions, or otherwise, the registrant has
been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in successful
defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection
with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed
in the Act and will be governed by the final adjudication of
such issue.
IV-3
<PAGE> 17
SCHEDULE V--PROPERTY, PLANT AND EQUIPMENT
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------
BALANCE AT BALANCE
BEGINNING ADDITIONS ACQUISITIONS AT END
CLASSIFICATION OF PERIOD AT COST (1) AND OTHER (2) RETIREMENTS OF PERIOD
- - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Land $ 4,632,352 $ 65,665 $ 242,262 $ -0- $ 4,940,279
Buildings 199,819,245 26,240,985 4,781,021 291,717 230,549,534
Machinery and equipment 628,262,887 76,026,214 (34,420,788) 18,586,235 651,282,078
Construction in progress 29,558,515 (18,353,678)(3) 143,667 -0- 11,348,504
------------ ------------ ------------ ----------- ------------
TOTALS $862,272,999 $ 83,979,186 $(29,253,838) $18,877,952 $898,120,395
============ ============ ============ =========== ============
YEAR ENDED JANUARY 2, 1993
Land $ 2,593,311 $ 2,057,541 $ -0- $ 18,500 $ 4,632,352
Buildings 173,661,175 27,425,568 ( 1,059,739) 207,759 199,819,245
Machinery and equipment 546,629,604 96,847,274 ( 1,103,376) 14,110,615 628,262,887
Construction in progress 46,727,823 (17,169,308)(3) -0- -0- 29,558,515
------------ ------------ ------------ ----------- ------------
TOTALS $769,611,913 $109,161,075 $( 2,163,115) $14,336,874 $862,272,999
============ ============ ============ =========== ============
YEAR ENDED JANUARY 4, 1992
Land $ 3,223,368 $ -0- $ -0- $ 630,057 $ 2,593,311
Buildings 151,716,975 22,786,357 ( 157,565) 684,592 173,661,175
Machinery and equipment 504,747,066 52,096,607 ( 441,329) 9,772,740 546,629,604
Construction in progress 32,118,483 14,609,340 (3) -0- -0- 46,727,823
------------ ------------ ------------ ----------- ------------
TOTALS $691,805,892 $ 89,492,304 $( 598,894) $11,087,389 $769,611,913
============ ============ ============ =========== ============
</TABLE>
(1) Additions consist of expansion throughout the vertical operation.
(2) 1993 includes $6,078,883 relating to an acquisition, ($562,187) arising
from the translation of currency statements, ($40,150,180) relating to a
write-down of assets and $5,379,646 from basis adjustments arising from
the adoption of FAS 109. 1992 includes $2,046,154 relating to an
acquisition and ($4,209,269) arising from the translation of foreign
currency statements. 1991 amounts are the effects of translating foreign
currency statements.
(3) Net of transfers from construction in progress to the appropriate building
or machinery and equipment account.
IV-4
<PAGE> 18
SCHEDULE VI--ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO COSTS ACQUISITIONS AT END
CLASSIFICATION OF PERIOD AND EXPENSES (1) AND OTHER (2) RETIREMENTS OF PERIOD
- - - - - - - - - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Buildings $ 43,911,329 $ 7,591,011 $ 1,118,312 $ 144,909 $ 52,475,743
Machinery and equipment 319,581,937 57,738,102 (10,254,632) 12,306,594 354,758,813
------------ ----------- ------------ ----------- ------------
TOTALS $363,493,266 $65,329,113 $ (9,136,320) $12,451,503 $407,234,556
YEAR ENDED JANUARY 2, 1993
Buildings $ 36,101,502 $ 8,009,304 $ (50,250) $ 149,227 $ 43,911,329
Machinery and equipment 278,374,264 51,681,719 269,045 10,743,091 319,581,937
------------ ----------- ------------ ----------- ------------
TOTALS $314,475,766 $59,691,023 $ 218,795 $10,892,318 $363,493,266
YEAR ENDED JANUARY 4, 1992
Buildings $ 31,976,168 $ 4,126,692 $ (1,358) $ -0- $ 36,101,502
Machinery and equipment 236,574,458 51,287,855 (133,193) 9,354,856 278,374,264
------------ ----------- ------------ ----------- ------------
TOTALS $268,550,626 $55,414,547 $ (134,551) $ 9,354,856 $314,475,766
============ =========== ============ =========== ============
</TABLE>
(1) The annual provisions for depreciation have been computed in accordance
with the following ranges of rates:
Buildings 25 to 40 years
Machinery and equipment 6 to 25 years
(2) 1993 includes $2,269,634 relating to an acquisition, ($185,910) arising
from the translation of currency statements, ($12,582,063) relating to
a write-down of assets and $1,362,019 from basis adjustments arising
from the adoption of FAS 109.
1992 includes $1,718,843 relating to an acquisition and ($1,500,048)
arising from the translation of foreign currency statements.
1991 amounts are the effects of translating foreign currency statements.
IV-5
<PAGE> 19
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------
BALANCE AT ADDITIONS BALANCE
BEGINNING CHARGED TO COSTS AT END
DESCRIPTION OF PERIOD AND EXPENSES ACQUISITION DEDUCTIONS OF PERIOD
- - - - - - - - - ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Allowance for doubtful accounts $5,579,113 $ 7,852,497 $ 779,198 $ 5,723,524 (1) $ 8,487,284
Reserve for cash discounts 2,548,190 14,912,255 170,274 14,996,320 (2) 2,634,399
---------- ----------- ---------- ----------- -----------
TOTALS $8,127,303 $22,764,752 $ 949,472 $20,719,844 $11,121,683
========== =========== ========== =========== ===========
YEAR ENDED JANUARY 2, 1993
Allowance for doubtful accounts $5,239,488 $ 4,086,251 $ -0- $ 3,746,626 (1) $ 5,579,113
Reserve for cash discounts 1,821,809 13,441,653 -0- 12,715,272 (2) 2,548,190
---------- ----------- ---------- ----------- -----------
TOTALS $7,061,297 $17,527,904 $ -0- $16,461,898 $ 8,127,303
========== =========== ========== =========== ===========
JANUARY 4, 1992
Allowance for doubtful accounts $3,815,672 $ 6,067,096 $ -0- $ 4,643,280 (1) $ 5,239,488
Reserve for cash discounts 1,466,299 11,444,930 -0- 11,089,420 (2) 1,821,809
Advertising allowances 13,443 -0- -0- 13,443 (3) -0-
---------- ----------- ---------- ----------- -----------
TOTALS $5,295,414 $17,512,026 $ -0- $15,746,143 $ 7,061,297
========== =========== ========== =========== ===========
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Discounts taken by customers during the year.
(3) Allowances taken by customers during the year.
IV-6
<PAGE> 20
SCHEDULE IX--SHORT-TERM BORROWINGS
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
WEIGHTED MAXIMUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
AVERAGE OUTSTANDING OUTSTANDING INTEREST RATE
BALANCE AT INTEREST DURING THE DURING THE DURING THE
CLASSIFICATION END OF PERIOD RATE PERIOD PERIOD (2) PERIOD (3)
- - - - - - - - - ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JANUARY 1, 1994
Notes payable $ 4,562,010 9.15% $ 4,962,009 $ 4,958,722 9.15%
Notes payable to banks (1) $77,146,992 3.86% $161,600,000 $105,909,259 3.50%
Commercial Paper (4) $ -0- N/A $ 12,880,000 $ 752,138 2.63%
YEAR ENDED JANUARY 2, 1993
Notes payable $ 4,962,009 9.15% $ 6,684,796 $ 6,004,838 9.15%
Notes payable to banks (1) $37,050,000 3.70% $140,900,000 $ 67,415,000 3.66%
Commercial Paper (4) $12,880,000 4.08% $ 50,000,000 $ 46,906,667 3.82%
YEAR ENDED JANUARY 4, 1992
Notes payable $ 6,684,796 9.15% $ 6,684,796 $ 6,684,796 9.15%
Notes payable to banks (1) $ 482,489 11.63% $ 63,300,000 $ 24,690,663 7.32%
</TABLE>
(1) Notes payable to banks generally represent borrowings under lines of
credit borrowing arrangements which have no termination date.
(2) The average amount outstanding was computed by taking a weighted daily
average of amounts outstanding throughout the year.
(3) The weighted average interest rate was computed by dividing the actual
interest expense by the average short-term debt outstanding.
(4) Commercial Paper was classified as long-term prior to 1992.
IV-7
<PAGE> 21
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
- - - - - - - - - --------------------------------------------------------------------------------
ITEM CHARGED TO COSTS AND EXPENSES
- - - - - - - - - --------------------------------------------------------------------------------
Year Ended
----------------------------------------------------
January 1, 1994 January 2, 1993 January 4, 1992
--------------- --------------- ----------------
<S> <C> <C> <C>
Maintenance and repairs $27,419,376 $29,507,672 $22,465,058
Advertising costs $33,930,388 $24,720,982 $20,029,372
</TABLE>
Charges to costs and expenses for depreciation and amortization of intangible
assets, preoperating costs and similar deferrals, taxes other than income and
payroll, and royalties for the above years are not presented as such amounts
are less than one percent of total sales and revenues.
IV-8
<PAGE> 22
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunder duly authorized.
RUSSELL CORPORATION
(Registrant)
Date 3/29/94 By /s/ John C. Adams
---------------------------
John C. Adams
Chairman, President and CEO
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report is signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
/s/ John C. Adams Chairman, President and CEO 3/29/94
---------------- -------
John C. Adams Date
Executive Vice President and
Chief Financial Officer, and
Director (Principal Financial
/s/ James D. Nabors Officer) 3/29/94
----------------- -------
James D. Nabors Date
----------------- Director -------
Herschel M. Bloom Date
/s/ Ronald G. Bruno Director 3/29/94
--------------- -------
Ronald G. Bruno Date
/s/ H. Scott Howell Director 3/29/94
--------------- -------
H. Scott Howell Date
--------------- Director -------
Glenn Ireland II Date
</TABLE>
IV-9
<PAGE> 23
<TABLE>
<S> <C> <C>
----------------------- Director -------
Crawford T. Johnson III Date
/S/ C. V. Nalley III Director 3/29/94
----------------------- -------
C. V. Nalley III Date
/S/ Benjamin Russell Director 3/29/94
----------------------- -------
Benjamin Russell Date
----------------------- Director -------
John R. Thomas Date
/S/ John A. White Director 3/29/94
----------------------- -------
John A. White Date
/S/ Larry E. Workman Controller 3/29/94
----------------------- (Principal Accounting Officer) -------
Larry E. Workman Date
</TABLE>
IV-10
<PAGE> 1
Exhibit (11)
COMPUTATIONS OF EARNINGS PER COMMON SHARE
RUSSELL CORPORATION AND SUBSIDIARIES
<TABLE>
<CAPTION>
Year Ended
----------------------------------------------------
January 1 January 2 January 4
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
Primary:
Average shares outstanding 40,847,222 40,708,052 40,468,036
Net effect of dilutive stock
options--based on the
treasury stock method using
average market price 374,950 512,904 421,873
----------- ----------- -----------
TOTALS 41,222,172 41,220,956 40,889,909
=========== =========== ===========
Net income applicable to
common shareholders $49,079,599 $81,944,872 $56,279,374
=========== =========== ===========
Per share amount $1.19 $1.99 $1.38
===== ===== =====
Fully diluted:
Average shares outstanding 40,847,222 40,708,052 40,468,036
Net effect of dilutive stock
options--based on the
treasury stock method using
the year-end market price,
if higher than average market
price 374,950 512,904 481,499
----------- ----------- -----------
TOTALS 41,222,172 41,220,956 40,949,535
=========== =========== ===========
Net income applicable to
common shareholders $49,079,599 $81,944,872 $56,279,374
=========== =========== ===========
Per share amount $1.19 $1.99 $1.37
===== ===== =====
</TABLE>
IV-11
<PAGE> 1
Exhibit (13)
1993 ANNUAL REPORT TO SHAREHOLDERS
IV-12
<PAGE> 2
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
THE YEAR AT A GLANCE 1993 1992 % CHANGE
<S> <C> <C> <C>
Net sales $930,786,539 $899,136,495 4
Income before income taxes 80,717,226 129,506,543 (38)
Federal and state income taxes 31,619,365 47,269,494 (33)
Net income applicable to common shareholders 49,079,599 81,944,872 (40)
Net income per common share $1.19 $1.99 (40)
Common and common equivalent shares outstanding 41,222,172 41,220,956 -
AT YEAR END 1993 1992 % CHANGE
Total assets $1,017,043,646 $964,932,800 5
Long-term debt and redeemable preferred stock 163,333,633 186,121,829 (12)
Stockholders' equity 587,651,315 570,003,074 3
Stockholders' equity per common share $14.54 $13.97 4
Number of employees 16,640 16,594 -
Number of shareholders 13,000 13,000 -
</TABLE>
COMPONENTS OF THE SALES DOLLAR
Profits......................... 5.3%
Taxes...................... 4.1%
Interest and Depreciation................ 8.9%
Utilities, Supplies and Services ................... 22.1%
Raw Materials........................................... 23. 1%
Labor............................................................ 36.5%
<PAGE> 3
CONSOLIDATED STATEMENTS OF INCOME
RUSSELL CORPORATION AND SUBSIDIARIES
Years Ended January 1, 1994, January 2, 1993 and January 4, 1992
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
Net sales.................................................... $ 930,786,539 $ 899,136,495 $ 804,584,939
Cost of goods sold........................................... 613,324,466 592,836,566 553,159,643
------------- ------------- -------------
317,462,073 306,299,929 251,425,296
Selling, general and
administrative expenses ..................................... 185,107,319 161,655,145 142,773,638
Write-down of assets.......................................... 34,583,080 -0- -0-
------------- ------------- -------------
97,771,674 144,644,784 108,651,658
Other deductions (income):
Interest expense............................................. 16,948,170 15,841,273 18,096,696
Other--net................................................... 106,278 (703,032) (310,980)
------------- ------------- -------------
17,054,448 15,138,241 17,785,716
------------- ------------- -------------
INCOME BEFORE INCOME TAXES 80,717,226 129,506,543 90,865,942
Provision for income taxes:
Currently payable............................................ 38,772,176 43,142,987 35,779,380
Deferred..................................................... (7,152,811) 4,126,507 (1,752,380)
------------- ------------- -------------
31,619,365 47,269,494 34,027,000
------------- ------------- -------------
NET INCOME 49,097,861 82,237,049 56,838,942
Preferred Stock dividends..................................... 18,262 292,177 559,568
------------- ------------- -------------
NET INCOME APPLICABLE TO COMMON SHAREHOLDERS $ 49,079,599 $ 81,944,872 $ 56,279,374
============= ============= =============
Net income per common and common
equivalent share............................................. $1.19 $1.99 $1.38
============= ============= =============
See notes to consolidated financial statements.
</TABLE>
17
<PAGE> 4
January 1, 1994 and January 2, 1993
<TABLE>
<CAPTION>
1993 1992
-------------- -------------
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash................................................................................... $ 3,897,324 $ 6,094,933
Trade accounts receivable, less
allowances of $11,121,683 in 1993 and $8,127,303 in 1992.............................. 176,949,035 173,578,915
Inventories............................................................................ 278,620,072 231,229,890
Prepaid expenses and other current assets.............................................. 6,747,470 8,949,157
Future income tax benefits............................................................. 7,374,562 7,685,399
-------------- -------------
TOTAL CURRENT ASSETS 473,588,463 427,538,294
PROPERTY, PLANT AND EQUIPMENT
Land................................................................................... 4,940,279 4,632,352
Buildings.............................................................................. 230,549,534 199,819,245
Machinery and equipment................................................................ 651,282,078 628,262,887
Construction in progress .............................................................. 11,348,504 29,558,515
-------------- -------------
898,120,395 862,272,999
Less allowances for depreciation
and amortization...................................................................... (407,234,556) (363,493,266)
============== =============
490,885,839 498,779,733
OTHER ASSETS 52,569,344 38,614,773
-------------- -------------
$1,017,043,646 $ 964,932,800
============== =============
</TABLE>
18
<PAGE> 5
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1993 1992
-------------- -------------
CURRENT LIABILITIES
<S> <C> <C>
Short-term debt and notes payable......................................... $ 95,187,706 $ 54,892,009
Accounts payable and accrued expenses:
Trade accounts.......................................................... 35,080,704 36,868,004
Employee compensation .................................................. 15,502,481 14,214,668
Other................................................................... 8,203,283 5,960,035
-------------- -------------
58,786,468 57,042,707
Income taxes.............................................................. 21,471,162 9,838,857
Current maturities of long-term debt
and capital lease obligations ........................................... 20,150,437 20,295,904
-------------- -------------
TOTAL CURRENT LIABILITIES 195,595,773 142,069,477
LONG-TERM DEBT AND CAPITAL LEASE
OBLIGATIONS-less current maturities....................................... 163,333,633 185,499,729
DEFERRED LABILITIES
Income taxes.............................................................. 49,301,746 53,843,554
Accrued pension and other................................................. 21,161,179 12,894,866
-------------- -------------
70,462,925 66,738,420
REDEEMABLE CUMULATIVE PREFERRED STOCK
Par value $.01 per share; authorized
10,000,000 shares; issued and
outstanding 62,210 in 1992................................................. -0- 622,100
STOCKHOLDERS' EQUITY
Common Stock, par value $.01 per share;
authorized 150,000,000 shares;
issued 41,419,958 shares.................................................. 414,200 414,200
Paid-in capital ........................................................... 49,040,060 49,022,677
Retained earnings.......................................................... 566,789,639 533,660,053
Treasury Stock (1993-1,014,617 shares;
1992-609,794 shares) .................................................... (23,040,306) (9,931,764)
Currency translation adjustment ........................................... (5,552,278) (3,162,092)
-------------- -------------
587,651,315 570,003,074
COMMITMENTS
-------------- -------------
$1,017,043,646 $ 964,932,800
============== =============
</TABLE>
See notes to consolidated financial statements.
19
<PAGE> 6
CONSOLIDATED STATEMENTS OF CASH FLOW
RUSSELL CORPORATION AND SUBSIDIARIES
Years Ended January 1, 1994, January 2, 1993 and January 4, 1992
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income ................................................................... $ 49,097,861 $ 82,237,049 $ 56,838,942
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .............................................. 66,226,569 60,444,051 56,594,287
Deferred income taxes ...................................................... (7,152,811) 4,126,507 (1,752,380)
Loss (gain) on sale of property, plant and equipment........................ 1,152,666 708,079 (78,781)
Write-down of assets........................................................ 34,583,080 -0- -0-
Changes in assets and liabilities:
Accounts receivable........................................................ 4,612,635 (36,415,202) (2,221,468)
Inventories................................................................ (21,297,900) (69,652,047) 10,722,707
Prepaid expenses and other current assets ................................. 590,563 159,197 (618,625)
Accounts payable and accrued expenses ..................................... (4,469,029) 13,141,746 (10,409,714)
Income taxes payable ...................................................... 10,809,586 (3,302,860) (816,516)
Pension and other deferred liabilities..................................... 5,667,899 6,122,618 3,198,803
Other assets............................................................... (3,768,707) (1,429,602) (488,891)
------------- ------------- -------------
Net cash flows provided by operating activities................................ 136,052,412 56,139,536 110,968,364
INVESTING ACTIVITIES
Decrease in temporary investments............................................. -0- 10,073,726 1,660,535
Acquisition (net of cash acquired) ........................................... (34,548,300) -0- -0-
Purchase of property, plant and equipment..................................... (83,979,186) (109,161,075) (89,532,073)
Proceeds from sale of property, plant and equipment........................... 5,609,631 2,981,041 1,620,507
------------- ------------- -------------
Net cash used in investing activities ......................................... (112,917,855) (96,106,308) (86,251,031)
FINANCING ACTIVITIES
Payments on notes payable..................................................... (400,000) (1,722,786) -0-
Short-term borrowing.......................................................... 27,700,031 35,253,222 1,535,573
Payments on long-term debt.................................................... (22,876,277) (47,861,770) (12,013,120)
Long-term borrowings.......................................................... -0- 75,000,000 -0-
Dividends on Preferred Stock.................................................. (18,262) (292,177) (559,568)
Retirement of Preferred Stock................................................. (622,100) (4,962,329) (15,562)
Dividends on Common Stock..................................................... (15,950,013) (13,837,718) (12,948,178)
Distribution of treasury shares .............................................. 2,104,841 2,046,096 1,834,011
Cost of Common Stock for treasury............................................. (15,196,000) (137,046) (733,701)
------------- ------------- -------------
Net cash (used in) provided by financing activities............................ (25,257,780) 43,485,492 (22,900,545)
EFFECT OF EXCHANGE RATE CHANGES ON CASH........................................ (74,386) (767,862) 39,611
------------- ------------- -------------
NET (DECREASE) INCREASE IN CASH (2,197,609) 2,750,858 1,856,399
Cash balance at beginning of year.............................................. 6,094,933 3,344,075 1,487,676
------------- ------------- -------------
Cash balance at end of year.................................................... $ 3,897,324 $ 6,094,933 $ 3,344,075
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
20
<PAGE> 7
CONSOLIDATED STATEMENTS
OF STOCKHOLDERS EQUITY
RUSSELL CORPORATION AND SUBSIDIARIES
Years Ended January 1, 1994, January 2, 1993 and January 4, 1992
<TABLE>
<CAPTION>
1993 1992 1991
------------- ------------- -------------
COMMON STOCK
<S> <C> <C> <C>
BALANCE AT BEGINNING AND END OF YEAR $ 414,200 $ 414,200 $ 414,200
============= ============= =============
PAID-IN CAPITAL
Balance at beginning of year ............................. $ 49,022,677 $ 47,383,897 $ 48,494,262
Exercise of stock options................................. 17,383 (270,386) (1,109,802)
Retirement of Preferred Stock............................. -0- -0- (563)
Reissuance of Treasury Stock.............................. -0- 1,909,166 -0-
------------- ------------- -------------
BALANCE AT END OF YEAR $ 49,040,060 $ 49,022,677 $ 47,383,897
============= ============= =============
RETAINED EARNINGS
Balance at beginning of year .............................. $ 533,660,053 $ 465,552,899 $ 422,221,703
Net income for the year ................................... 49,097,861 82,237,049 56,838,942
------------- ------------- -------------
582,757,914 547,789,948 479,060,645
Cash dividends--preferred stocks........................... 18,262 292,177 559,568
Cash dividends--common stocks
(1993-$.39; 1992-$.34; 1991-$.32) ....................... 15,950,013 13,837,718 12,948,178
------------- ------------- -------------
BALANCE AT END OF YEAR $ 566,789,639 $ 533,660,053 $ 465,552,899
============= ============= =============
TREASURY STOCK
Balance at beginning of year ............................. $ 9,931,764 $ 13,601,818 $ 15,811,931
Cost of shares acquired (1993-549,360; 1992-4,191;
1991-28,173) ........................................... 15,196,000 137,046 733,701
Shares distributed (1993-144,537; 1992-245,459;
1991-189,801) ........................................... (2,087,458) (3,807,100) (2,943,814)
------------- ------------- -------------
BALANCE AT END OF YEAR $ 23,040,306 $ 9,931,764 $ 13,601,818
============= ============= =============
CURRENCY TRANSLATION ADJUSTMENT
Balance at beginning of year ............................. $ (3,162,092) $ 2,751,721 $ 1,034,018
Translation (loss) gain................................... (2,390,186) (5,913,813) 1,717,703
------------- ------------- -------------
BALANCE AT END OF YEAR $ (5,552,278) $ (3,162,092) $ 2,751,721
============= ============= =============
</TABLE>
See notes to consolidated financial statements.
21
<PAGE> 8
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
RUSSELL CORPORATION AND SUBSIDIARIES
Years Ended January 1,1994, January 2,1993 and January 4,1992
NOTE 1--DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Russell Corporation is a vertically integrated international designer,
manufacturer and marketer of leisure apparel, activewear, licensed sports
apparel, athletic uniforms, better knit shirts and a comprehensive line of
lightweight, yarn-dyed woven fabrics. The Company is considered a single
business segment. Apparel products are marketed to sporting goods dealers,
department and specialty stores, mass merchandisers, golf pro shops, college
bookstores, screen printers, distributors and mail-order houses.
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the
accounts of Russell Corporation and its subsidiaries after the elimination of
intercompany accounts and transactions.
ACQUISITION OF THE GAME INC.: On December 23, 1993, the Company acquired The
Game Inc. The Game Inc. is a leading designer, producer and marketer of
high-quality, licensed sports headwear and apparel for colleges and
universities and the four major professional sports leagues (National Football
League, National Basketball Association, Major League Baseball, and National
Hockey League). The all cash transaction of approximately $35,000,000 was
accounted for as a purchase. The excess of the purchase price over the fair
value of assets and liabilities acquired of approximately $14,000,000 was
recorded as goodwill. The consolidated balance sheet at January 1, 1994
includes the accounts of The Game Inc. The results of operations of The Game
Inc. for the year ended January 1, 1994 would not have a material impact on the
pro-forma results of operations of the Company.
INVENTORIES: Inventories of finished goods, work-in-process and raw
materials are carried at the lower of cost or market, with cost for a
substantial portion of inventories determined under the Last-In, First-Out
(LIFO) method. Certain inventories are carried under the First-In, First-Out
(FIFO) method, or the average cost method and were valued at approximately
$56,000,000 in 1993 and $24,000,000 in 1992.
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Finished goods ................................................ $ 243,875,628 $ 198,188,934
Work-in-process................................................ 30,381,653 36,506,342
Raw materials and supplies .................................... 41,102,626 43,100,321
------------- -------------
315,359,907 277,795,597
============= =============
Less LIFO reserve.............................................. 36,739,835 46,565,707
------------- -------------
TOTALS $ 278,620,072 $ 231,229,890
============= =============
</TABLE>
PROPERTY, PLANT AND EQUIPMENT: Provision for depreciation of the principal
items of property, plant and equipment (recorded at cost), including
those items held under capital lease agreements, has been computed generally
on the straight-line method at rates based upon their estimated useful lives.
OTHER ASSETS: Included in other assets is goodwill of approximately $30,000,000
and $24,000,000 which is net of accumulated amortization of $3,100,000 and
$3,700,000 in 1993 and 1992, respectively, and an investment of approximately
$18,200,000 and $13,700,000 in real estate developments in 1993 and 1992,
respectively. Goodwill is being amortized over twenty-five years on a
straight-line basis. The carrying value is reviewed if the facts and
circumstances suggest that it may be impaired. If this review indicates that
goodwill will not be recoverable based upon the undiscounted cash flows of the
entity acquired over the remaining amortization period, the Company's carrying
value of the goodwill is reduced by the estimated shortfalls of cash flows.
INCOME TAXES: Effective January 3, 1993, the Company adopted Financial
Accounting Standards Board (FASB) Statement 109, "Accounting for Income Taxes".
Under Statement 109, deferred tax assets and liabilities are determined based
upon differences between financial reporting and tax bases of assets and
liabilities and are measured at the enacted tax rates and laws that will be in
effect when the differences are expected to reverse. The impact of adopting
Statement 109 was not material and, as permitted by Statement 109, prior years'
financial statements have not been restated. The Company had previously
recorded income tax expense under the deferred method, whereby timing
differences were recorded at the tax rates in effect for the year in which
the differences arose and were not adjusted for tax rate changes.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: FASB Statement No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions"
(Standard), requires that employers providing postemployment benefits, other
than pension benefits, accrue the cost of those benefits over the service lives
of the employees expected to be eligible to receive such benefits. Effective
January 3, 1993, the Company adopted the Standard, and elected to immediately
expense the present value of the past service obligation, which was not
material. Such costs were previously recognized on a "pay as you go" basis.
CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS: Financial instruments
which subject the Company to credit risk are primarily trade accounts
receivable. Concentrations of credit risk with respect to trade accounts
receivable are limited due to the large number and diversity of customers
comprising the Company's customer base. Management believes that any risk
associated with trade accounts receivable is adequately provided for in the
allowance for doubtful accounts. The carrying value of accounts receivable
approximates its market value at January 1, 1994.
Sales to a major customer and its affiliates represented 16.1% and 12.9% of
the Company's net sales for the years ended January 1, 1994 and January 2, 1993,
respectively. Accounts receivable from this customer represented 12.7% and
11.2% of the Company's net accounts receivable at January 1, 1994 and January
2, 1993, respectively.
The Company periodically enters into futures contracts as hedges for its
purchases of cotton inventory. Gains and losses on these hedges
22
<PAGE> 9
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
RUSSELL CORPORATION AND SUBSIDIARIES
NOTE 1--CONTINUED
are matched to inventory purchases and reflected in cost of sales as such
inventory is sold.
At January 1, 1994, the Company had outstanding letters of credit of
approximately $12,200,000 for the purchase of inventory.
EARNINGS PER COMMON SHARE: Earnings per common share are computed by using the
average number of shares of Common Stock outstanding, plus equivalent shares
(employee stock options) with net income adjusted for Preferred Stock
dividends. Earnings per common share, assuming full conversion, have not been
reported since any difference is minimal.
FISCAL YEAR: The Company's fiscal year ends on the Saturday nearest to
January 1, which periodically results in a fiscal year of 53 weeks, as was the
case for 1991. Fiscal years 1993, 1992 and 1991 ended on January 1, 1994,
January 2, 1993 and January 4, 1992, respectively.
NOTE 2--WRITE-DOWN OF ASSETS
During the third quarter of 1993, the Company completed a strategic review of
its operations and concluded that certain property, plant and equipment and
goodwill had a net realizable value substantially less than the book value of
such assets. As a result, during the third quarter, the Company recognized a
noncash, pre-tax charge totaling approximately $35 million, which principally
involved the Company's textile operations and its Cross Creek Apparel, Inc.
subsidiary. The charge included a write-off of $7 million in goodwill
associated with its 1988 purchase of Cross Creek Apparel, Inc. The remaining
charges were for property, plant and equipment primarily used to manufacture
fabrics that go into higher priced specialty markets including placket shirts,
slacks, dress shorts, and dress shirts. The Company overestimated the market's
potential for these items as volumes did not materialize. Implementation of
the results of the Company's strategic review will result in reduced pre-tax
depreciation and amortization charges of approximately $5 million per year and
will have an immaterial impact on net sales.
NOTE 3--LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS
Long-term debt and capital lease obligations include the following:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Notes payable to financial institutions:
8.83% notes due annually through 1999............................................. $ 64,300,000 $ 75,000,000
6.72% notes due annually 1996 through 2002........................................ 75,000,000 75,000,000
8.01% notes due annually through 1997............................................. 34,500,000 43,000,000
5.00% to 12.6% notes due through 1996 ............................................ 1,087,577 3,945,282
Capital lease obligations (3.25% to 6.0%) due annually through 2002................ 8,596,493 8,850,351
------------- -------------
183,484,070 205,795,633
Less current maturities............................................................ 20,150,437 20,295,904
------------- -------------
TOTALS $ 163,333,633 $ 185,499,729
============= =============
</TABLE>
The notes are unsecured and contain restrictions on the payment of dividends;
incurrence of indebtedness, liens or leases; acquiring investments; retirement
of capital stock and the maintenance of working capital. At January 1, 1994,
$137,725,858 of retained earrings was unrestricted for payment of dividends.
The capital lease obligations relate to land, buildings and machinery and
equipment financed primarily by industrial revenue bonds. The property
collateralized under the capital lease obligations is included in property,
plant and equipment with a net carrying value of $7,575,432 and $8,194,990 at
January 1, 1994 and January 2, 1993, respectively.
The following summarizes the maturities of long-term debt and capital lease
obligations: 1994--$20,150,437;1995--$19,394,677; 1996--$31,203,242;1997--
$31,864,286;1998--$22,564,286; and thereafter 58,307,142.
At January 1, 1994, the Company had outstanding an interest rate swap
agreement. Under the agreement the Company receives a fixed rate of 6.14% on
$75 million and pays a floating-rate based upon LIBOR as determined at
six-month intervals. The transaction effectively changes a portion of the
Company's interest rate exposure from a fixed rate to a floating-rate basis.
The carrying value of the Company's short-term borrowing approximates their
fair value. The fair value of the Company's long-term debt is estimated using
discounted cash flow analyses, based upon the Company's current incremental
borrowing rates for similar types of borrowing arrangements. The carrying value
of such instruments approximates their fair value at January 1, 1994.
NOTE 4--SHORT-TERM DEBT AND NOTES PAYABLE
The Company may borrow up to $213 million under informal line of credit
arrangements with six banks, on such terms as the Company and the banks may
mutually agree. Generally, the arrangements may be cancelled by either party at
any time. At January 1, 1994, amounts outstanding under the line of credit
arrangements totaled $77,147,000. The average interest rates of
bank borrowing during 1993, 1992 and 1991 were 3.5%, 3.7% and 7.3%,
respectively.
At January 2, 1993, the Company had outstanding commercial paper in the
amount of $12,880,000. The commercial paper program was discontinued in 1993
and no amounts were outstanding at January 1, 1994.
23
<PAGE> 10
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
RUSSELL CORPORATION AND SUBSIDIARIES
NOTE 5--QUALIFIED NONCONTRIBUTORY PENSION AND RETIREMENT PLAN
The Company has a qualified noncontributory pension plan covering
substantially all of its employees. The benefits are based upon years of
service and the employees' highest consecutive five years of compensation
during the last ten years of employment. The Company's funding policy is to
contribute annually the maximum amount that can be deducted for federal
income tax purposes. Contributions are intended to provide not only for
benefits attributed to service-to-date, but also for those expected to be
earned in the future.
<TABLE>
<CAPTION>
Net Pension cost included the following components: 1993 1992 1991
----------- ----------- ------------
<S> <C> <C> <C>
Service cost............................................................. $ 4,708,930 $ 4,049,195 $ 3,822,313
Interest cost ........................................................... 6,181,603 5,479,499 5,493,034
Actual return on plan assets............................................. (5,067,652) (2,075,773) (20,998,948)
Net amortization and deferral............................................ (2,688,432) (5,254,102) 14,139,085
----------- ----------- ------------
NET PENSION COST $ 3,134,449 $ 2,198,819 $ 2,455,484
=========== =========== ============
</TABLE>
The following table sets forth the plan's funded status and amounts recognized
in the Company's consolidated balance sheets:
<TABLE>
<CAPTION>
1993 1992
------------- -------------
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested
benefits of $66,025,320 and $54,815,866, respectively............ $ (70,967,887) $ (59,520,714)
============= =============
Projected benefit obligation....................................... $ (90,572,471) $ (77,975,641)
Plan assets at fair value ......................................... 90,912,913 89,935,238
------------- -------------
Over funded status ................................................ 340,442 11,959,597
Unrecognized net gain.............................................. (10,316,763) (18,508,180)
Unrecognized prior service cost ................................... 5,503,205 5,888,176
Unrecognized net transition asset ................................. (7,090,802) (7,769,062)
------------- -------------
ACCRUED PENSION EXPENSE $ (11,563,918) $ (8,429,469)
============= =============
</TABLE>
Plan assets at January 1, 1994, are invested primarily in U.S. government
securities and listed corporate bonds and stocks, including common stock of
the Company having a market value of $16,977,120. The weighted average
discount rates used in determining the actuarial present value of the
projected benefit obligation were 7.25% in 1993 and 7.75% in 1992 and 1991.
The rates of increase in future compensation levels were 4.0% in 1993 and 4.5%
in 1992 and 1991. The expected long-term rate of return on plan assets was
8.75% in 1993, 1992 and 1991.
NOTE 6 -- INCOME TAXES
Significant components of the provision for income taxes are as follows:
<TABLE>
<CAPTION>
LIABILITY METHOD Deferred Method
----------------------------- -----------------------------------------------------------
1993 1992 1991
----------------------------- -------------------------- -----------------------------
CURRENTLY Currently Currently
PAYABLE DEFERRED Payable Deferred Payable Deferred
----------------------------- ------------ ----------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Federal.................... $ 36,091,121 $ (6,658,202) $ 38,779,296 $ 3,754,318 $ 32,067,708 $ (1,717,595)
State...................... 2,681,055 (494,609) 4,363,691 372,189 3,711,672 (34,785)
------------ ------------ ------------ ----------- ------------ ------------
TOTALS $ 38,772176 $ (7,152,811) $ 43,142,987 $ 4,126,507 $ 35,779,380 $ (1,752,380)
============ ============ ============ =========== ============ ============
</TABLE>
<TABLE>
<CAPTION>
The components of deferred income tax (benefit) expense for 1992 and 1991 are
as follows:
1992 1991
------------ ------------
<S> <C> <C>
Depreciation............................................................... $ 6,611,706 $ (421,710)
Provision for bad debts ................................................... (246,407) (221,052)
Pension and employee benefits.............................................. (802,805) (942,406)
Inventory.................................................................. (1,192,462) 429,822
Other-net.................................................................. (243,525) (597,034)
------------ ------------
TOTALS $ 4,126,507 $ (1,752,380)
============ ============
</TABLE>
24
<PAGE> 11
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
RUSSELL CORPORATION AND SUBSIDIARIES
NOTE 6--INCOME TAXES--(CONTINUED)
The reconciliation of income tax computed by applying the statutory federal
income tax rate of 35% (34% for 1992 and 1991) to income before income taxes to
total income tax expense is:
<TABLE>
<CAPTION>
LIABILITIES Deferred Method
----------- -----------------------------
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Taxes at statutory rate on pre-tax income ............................ $ 28,251,029 $ 44,032,225 $ 30,894,420
State income taxes, net of federal income tax benefit ................ 1,421,190 3,113,859 2,418,796
Goodwill.............................................................. 2,728,900 368,799 381,401
Adoption of FASB Statement 109........................................ (1,988,705) -0- -0-
Effect of tax rate change on temporary differences.................... 1,183,411 -0- -0-
Other-net............................................................. 23,540 (245,389) 332,383
------------ ------------ ------------
TOTALS $ 31,619,365 $ 47,269,494 $ 34,027,000
============ ============ ============
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components
of the Company's deferred tax liabilities and assets, as of January 1, 1994,
are as follows:
<TABLE>
<S> <C>
Deferred tax liabilities:
Property, plant and equipment....................................................... $ 50,873,048
Other .............................................................................. 4,247
-------------
TOTAL DEFERRED TAX LIABILITIES 55,120,548
=============
Deferred tax assets:
Pension and post-employment obligations ............................................ 6,128,970
Inventory .......................................................................... 2,582,411
Accounts receivable................................................................. 2,704,763
Employee benefits................................................................... 1,777,220
Capital loss and credit carryforwards .............................................. 1,696,984
Total deferred tax assets............................................................ 14,890,348
Valuation allowance for deferred tax assets ......................................... (1,696,984)
-------------
NET DEFERRED TAX ASSETS 13,193,364
-------------
NET DEFERRED TAX LIABILITIES $ 41,927,184
=============
</TABLE>
NOTE 7--STOCK RIGHTS PLAN AND STOCK OPTION PLAN
On October 25, 1989, the Board of Directors declared a dividend of one Right
for each share of Common Stock outstanding which, when exercisable, entitles
the holder to purchase a unit of one one-hundredth share of Series A Junior
Participating Preferred Stock, par value $.01, at a purchase price of $85. Upon
certain events relating to the acquisition of, or right to acquire, beneficial
ownership of 20% or more of the Company's outstanding Common Stock by a
third-party or a change in control of the Company, the Rights entitle the
holder to acquire, after the Rights are no longer redeemable by the Company,
shares of Common Stock for each Right held at a significant discount to market.
The Rights will expire on October 25, 1999, unless redeemed earlier by the
Company at $.01 per Right under certain circumstances.
During 1993, the Company's shareholders approved the 1993 Executive Long-Term
Incentive Plan (1993 Plan). Persons eligible to participate in the 1993 Plan
include all officers and key employees of the Company and its subsidiaries.
The 1993 Plan permits the issuance of awards in several forms including
restricted stock, incentive stock options, non-qualified stock options, stock
appreciation rights and performance shares and performance unit awards. During
1993, no stock appreciation rights or performance shares and performance unit
awards were granted under the 1993 Plan.
Under the 1993 Plan and predecessor stock option plans, a total of 3,023,068
shares of Common Stock are reserved for issuance. The options are granted at a
price equal to the stock's fair market value at date of grant. The options are
exercisable two years after the date of grant and expire ten years after the
date of grant. The following table summarizes the status of options under the
1993 Plan and predecessor plans:
25
<PAGE> 12
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
RUSSELL CORPORATION AND SUBSIDIARIES
NOTE 7--STOCK RIGHTS PLAN AND STOCK OPTION PLAN--(CONTINUED)
<TABLE>
<CAPTION>
1993 1992 1991
---------------------------- --------------------- ---------------------------
NUMBER OPTION Number Option Number Option
OF SHARES PRICE of Shares Price of Shares Price
----------- -------- ---------- ------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding....................... 1,253,068 $ 16.81 1,171,205 $ 8.88 1,340,002 $ 8.88
to to to
$ 29.00 $ 29.00 29.00
Exercisable....................... 1,023,068 $ 16.81 631,795 $ 8.88 779,202 $ 8.88
to to to
$ 29.00 $ 22.06 $ 22.06
Granted........................... 230,000 $ 27.50 -0- $ .00 560,800 $ 26.38
$ 29.00
Exercised......................... 144,537 $ 8.88 149,297 $ 8.88 189,706 $ 4.45
to to to
$ 26.38 $ 22.06 $ 16.81
Cancelled......................... 3,600 $ 26.38 19,500 $ 22.06 -0- $ .00
to
$ 29.00
Available for future grants....... 1,770,000 448,260 428,760
</TABLE>
NOTE 8--CASH FLOWS
SUPPLEMENTAL CASH FLOW INFORMATION: Net cash provided by operating
activities in the consolidated statements of cash flows reflects cash payments
for interest and income taxes as follows:
<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Interest.............................. $ 18,087,866 $ 15,812,548 $ 18,014,521
Income taxes.......................... 29,630,833 42,491,105 35,239,054
</TABLE>
Excluded from the consolidated statements of cash flows was the effect of the
exchange of the Company's Common Stock rn the amount of $3,399,785 for a
company acquired in 1992.
NOTE 9--COMMITMENTS
At January 1, 1994, the Company had commitments for the acquisition of property
and equipment totaling $6,795,000 and was committed under noncancelable
operating leases with initial or remaining terms of one year or more to minimum
rental payments agregating $9,547,082, summarized by fiscal year periods as
follows: 1994--$2,587,086; 1995--$2,113,557; 1996--1,613,107; 1997--$1,401,167;
1988--$953,313 and thereafter--$878,852.
Lease and rental expense for fiscal years 1993, 1992, and 1991 was
$6,724,000, $5,774,000, and $5,660,000, respectively.
NOTE 10--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations:
Year ended January 1, 1994:
<TABLE>
<CAPTION>
Quarter Ended
--------------------------------------------------
April 4 July 4 October 3 January 1
--------------------------------------------------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales ............................... $ 204,654 $ 209,061 $ 266,622 $ 250,450
Gross profit ............................. 70,651 66,384 89,021 91,406
Write-down of assets ..................... -0- -0- (34,583) -0-
Net income (loss) ........................ 16,033 12,699 (3,759) 24,125
Net income (loss) per common and
common equivalent share ................. $.39 $.31 ($.09) $.59
</TABLE>
26
<PAGE> 13
NOTE 10--SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)-(CONTINUED)
Year ended January 2, 1993:
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------
April 5 July 5 October 4 January 2
-----------------------------------------------------
(Thousands of dollars, except per share data)
<S> <C> <C> <C> <C>
Net sales............................ $ 196,162 $ 186,713 $ 259,341 $ 256,920
Gross profit ........................ 66,903 60,104 88,867 90,426
Net income........................... 15,467 12,436 23,957 30,377
Net income per common and
common equivalent share ............ $.37 $.30 $.58 $.74
</TABLE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Shareholders
Russell Corporation
We have audited the accompanying consolidated balance sheets of Russell
Corporation and Subsidiaries as of January 1, 1994 and January 2, 1993, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three fiscal years in the period ending January 1, 1994. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Russell
Corporation and Subsidiaries at January 1, 1994 and January 2, 1993, and the
consolidated results of their operations and their cash flows for each of the
three fiscal years in the period ended January 1, 1994, in conformity with
generally accepted accounting principles.
ERNST & YOUNG
Birmingham, Alabama
January 26, 1994
DIVIDEND AND MARKET INFORMATION
The Common Stock of Russell Corporation is traded on the New York Stock
Exchange and other regional exchanges under the symbol RML. The range of high
and low prices of the Common Stock and the dividends per share paid during each
calendar quarter of the last two years are presented below:
<TABLE>
<CAPTION>
Market Price
-------------------------------
Dividend High Low Close
----------- -------------------------------
<S> <C> <C> <C>
First.......................... $.09 $36.87 $30.62
Second......................... .10 35.87 28.00
1993 Third.......................... .10 30.25 27.00
Fourth......................... .10 29.00 26.00
-----------
$.39 $28.25
First......................... $.08 $40.37 $33.50
Second........................ .08 38.50 31.25
1992 Third......................... .09 34.00 30.50
Fourth........................ .09 32.75 27.75
-----------
$.34 $31.37
</TABLE>
27
<PAGE> 14
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
COMPARATIVE PERFORMANCE, 1993 VS. 1992
Net sales for 1993 increased 4% to $930,787,000, an all-time high for the
Company. Sales benefitted from higher unit volumes of teamwear and fleece
apparel and improved average selling prices of teamwear and of T-shirts, which
resulted from a product mix shift. These improvements were partially offset by
lower average selling prices of fleece and placket shirts and lower unit
volumes of T-shirts and placket shirts. International sales grew 44% and
represented 7.5% of the Company's 1993 net sales.
Gross margin remained the same for the year at 34.1%. Improved manufacturing
efficiencies and lower raw material cost offset lower production volume and
pricing pressure brought on by slow economic growth and overcapacity in the
activewear industry.
Selling, general and administrative expenses were 19.9% of net sales
compared to 18.0% in 1992. The increase reflects aggressive brand-building
activities, including a 37% increase in advertising. Royalty payments increased
as a result of new sales of certain licensed sports apparel and the chic(R)
brand. The Company also continued to build its international sales
Interest expense increased due to higher short-term debt levels used to
support increased working capital assets, principally inventory. Excluding
acquisitions, inventories increased 9%. This compares favorably to increases
experienced by most other activewear manufacturers whose inventories were at
higher levels compared to last year.
During the third quarter of 1993, the Company completed a strategic
review of its operations and concluded that certain property, plant and
equipment (PP&E) and goodwill had a net realizable value substantially less
than the book value of such assets. As a result, during the third quarter, the
Company recognized a non-cash, pre-tax charge totaling approximately $35
million, which principally involved the Company's textile operations and Cross
Creek Apparel, Inc. The charge included a write-off of $7 million in goodwill
associated with the 1988 purchase of Cross Creek Apparel, Inc. which was deemed
unrecoverable based upon a forecast of the subsidiary's undiscounted cash
flows. The remaining charges were for PP&E primarily used to manufacture
fabrics that go into higher priced specialty markets including placket shirts,
slacks, dress shorts, and dress shirts. The Company overestimated the market
potential for these items as volumes did not materialize. Implementation of the
results of the Company's strategic review is expected to be completed in 1994
and will result in reduced pre-tax depreciation and amortization charges of
approximately $5 million per year and will have an immaterial impact on sales.
The increase in the effective tax rate in 1993 to 39.1% from 36.5% reflects
both the federal income tax rate increase from 34% to 35% effective
retroactively to January 1, 1993, and a $1,200,000 increase to net deferred tax
liabilities as a result of the tax rate change. Also, the effective tax rate
increased as a result of a write-off of goodwill discussed above which is not
deductible in arriving at taxable income in the current year and will not be
recoverable in future years.
Effective January 3, 1993, the Company adopted Statements of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other than Pensions", and No. 109, "Accounting for Income Taxes." The
effect of these accounting changes on income was not material in 1993 and is
not expected to be material in future years.
Consistently strong cash flows and a strong balance sheet demonstrate the
Company's sound financial condition. The combination of net income plus
non-cash charges, $144 million in 1993, continued to be a major source of
funds. Net income plus non-cash charges, along with short-term borrowing,
primarily provided cash requirements for normal capital expenditures, working
capital needs, dividend payments, treasury share purchases, acquisitions, and
repayment of debt. At year-end 1993, the Company maintained $213 million in
informal lines of credit. The ratio of long-term debt as a percentage of total
capital employed
28
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
was 21.7% vs. 24.6% in 1992. No long-term debt or equity issues are anticipated
in 1994.
Cash expenditures for capital projects were $84 million compared to $109
million in 1992. This brought the five-year total to $484 million. Capital
expenditures are expected to be approximately $60 million in 1994 as the
Company continues to focus on productivity and quality gains through
modernization of manufacturing and distribution processes and customer service
activities.
Acquisitions totaled $35 million in 1993 with the cash purchase of The Game
Inc., a leading producer of licensed sports headwear and apparel. There were no
material acquisitions in 1992.
Common stock repurchases totaled $15,196,000 in 1993, representing 549,360
shares, compared to 4,191 shares at a cost of $137,046 in 1992. At year-end
1993, approximately 1.7 million additional shares could be purchased under
current Board authorization. All of the Company's Preferred Stock was redeemed
in 1993.
COMPARATIVE PERFORMANCE, 1992 VS. 1991
Sales and earnings were at record levels in 1992. Sales reached
$899,136,000, an increase of 12% over 1991. This increase was attributable to
both positive unit growth and improved selling prices. International sales
increased 43%, reflecting successful efforts in developing international
markets for Russell products.
Gross margin of 34.1% improved over the prior year's depressed level of
31.2%. This improvement was driven by improved pricing, lower raw material
costs and higher production volumes. The depressed gross margin in 1991
resulted from lower selling prices and reduced production schedules caused by
slower business activity during the first half of that year.
Selling, general and administrative expenses rose 13% in both 1991 and 1992.
While the percentage increase remained constant, actual dollar growth in 1992
reflected higher advertising for brand awareness, start-up cost associated with
a new warehouse and shipping facility, increased royalty payments from adding
Major League Baseball sales to the product line, and additional expenses for
domestic and international infrastructure growth. Selling, general and
administrative expenses grew as a percent of sales from 17.7% in 1991 to 18.0%
in 1992 as these expenses grew faster than sales.
Interest expense declined as a result of lower interest rates and the
repayment of long-term debt. The effective tax rate in 1992 declined from 37.4%
to 36.5% as the Company's European operations turned profitable.
At January 2, 1993, the ratio of current assets to current liabilities
was 3:1 compared to 4.6:1 the previous year. The twelve-month average
collection period for trade receivables was 63 days in 1992 compared to 62 days
in 1991. Inventories increased year-over-year, as planned, principally due to
higher cotton inventories and finished goods for entry into new markets and
improved customer service.
The combination of net income plus non-cash charges, $143 million in 1992,
continued to be a major source of capital. Cash flows from financing activities
included the issuance of $75 million of 6.72% senior notes due in 2002. At
year-end 1992, the Company maintained $175 million in informal lines of credit.
The ratio of long-term debt and Preferred Stock as a percentage of total
capital employed was 24.6% vs. 27.0% in 1991. A majority of the Company's
Preferred Stock was redeemed in 1992 when the rate on the Preferred Stock
dividend was reset at market rates.
Cash expenditures for capital projects were $109 million and were used
principally to expand spinning, dyeing and finishing, sewing, distribution, and
customer service capabilities.
IMPACT OF INFLATION AND CHANGING PRICES
Although inflation has remained relatively low in recent years, it is still
a factor in our economy and the Company continues to employ various means to
cope with its impact. The Company uses the LIFO method of accounting for the
majority of its inventories. Under this method, the cost of products sold
reported in the financial statements approximates current cost and thus reduces
the distortion in reporting income due to increasing costs. The charges to
operations for depreciation represent the allocation of historical costs
incurred over the past years, which in most instances were less than if they
had been based upon the current cost of productive capacity being utilized.
29
<PAGE> 16
FINANCIAL REVIEW
RUSSELL CORPORATION AND SUBSIDIARIES
(Dollar amounts in thousands, except per share data)
<TABLE>
<CAPTION>
- - - - - - - - - ---------------------------------------------------------------------------------------------------------------
1993 1992 1991
- - - - - - - - - ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATIONS
Net sales ....................................................... $ 930,787 $ 899,136 $ 804,585
Cost of goods sold............................................... 613,324 592,837 553,160
Interest expense................................................. 16,948 15,841 18,097
Income before income taxes (c) ................................. 80,717 129,507 90,866
Income taxes..................................................... 31,619 47,269 34,027
Net income applicable to common shares (c) ...................... 49,080 81,945 56,279
- - - - - - - - - ---------------------------------------------------------------------------------------------------------------
FINANCIAL DATA
Depreciation and amortization.................................... $ 66,227 $ 60,444 $ 56,594
Net income plus depreciation and amortization ................... 115,307 142,389 112,873
Capital expenditures ............................................ 83,979 109,161 89,532
Working capital.................................................. 277,993 285,469 255,392
Long-term debt and redeemable preferred stock.................... 163,334 186,122 185,923
Stockholders' equity............................................. 587,651 570,003 502,501
Capital employed................................................. 750,985 756,125 688,424
Total assets..................................................... 1,017,044 964,933 818,220
- - - - - - - - - ---------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA (A)
Net income (c) .................................................. $ 1.19 $ 1.99 $ 1.38
Dividends........................................................ .39 .34 .32
Book value....................................................... 14.54 13.97 12.39
Price range:
High........................................................... 36.87 40.37 36.25
Low............................................................ 26.00 27.75 19.75
- - - - - - - - - --------------------------------------------------------------------------------------------------------------
FINANCIAL STATISTICS
Net sales times: receivables (b) ................................ 5.3 5.8 5.9
inventories (b) ....................................... 3.7 4.6 4.8
capital employed (b) ................................. 1.2 1.2 1.2
Interest coverage (c) ........................................... 5.8 9.2 6.0
Income before income taxes as percent of sales (c) .............. 8.7% 14.4% 11.3%
Net income as percent of sales (c) ............................. 5.3% 9.1% 7.0%
Net income as percent of stockholders' equity (b,(c)............. 8.5% 15.3% 11.7%
- - - - - - - - - ---------------------------------------------------------------------------------------------------------------
OTHER DATA
Net common shares outstanding (a) (000's omitted) ............... 40,405 40,810 40,569
Approximate number of common shareowners ........................ 13,000 13,000 18,000
</TABLE>
(a) Adjusted for a stock distribution in 1986
(b) Average of amounts at beginning and end of fiscal year
(c) Fiscal 1993 includes a non-cash, pre-tax charge of $34,583,080
associated with the write-down of certain fixed assets and goodwill. The
after-tax impact of this write-down on 1993 earnings was $.56 per common
share.
30
<PAGE> 17
<TABLE>
<CAPTION>
1990 1989 1988 1987 1986 1985 1984
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
$ 713,812 $ 687,954 $ 531,136 $ 479,880 $ 437,520 $ 385,433 $ 353,025
461,281 457,875 344,109 316,738 284,965 268,806 246,059
18,885 15,643 8,788 6,892 4,051 3,801 5,357
109,672 102,728 85,793 80,145 80,382 51,951 47,988
41,725 37,994 32,028 33,811 37,100 22,339 20,075
67,378 64,163 53,728 46,334 43,282 29,612 27,913
---------------------------------------------------------------------------
$ 52,539 $ 45,633 $ 33,368 $ 26,039 $ 22,850 $ 19,955 $ 17,580
119,917 109,796 87,096 72,373 66,132 49,567 45,493
113,617 87,410 118,476 77,502 40,113 31,920 31,941
249,683 267,178 124,263 162,931 148,188 135,540 100,840
196,857 210,470 90,023 73,545 38,043 41,849 25,770
456,352 402,216 345,086 279,611 248,347 219,733 195,910
653,209 612,686 435,109 353,156 286,390 261,582 221,680
794,521 720,806 560,969 445,252 351,041 322,161 289,273
---------------------------------------------------------------------------
$ 1.65 $ 1.57 $ 1.36 $ 1.17 $ 1.08 $ .74 $ .70
.32 .28 .23 .192 .16 .15 .15
11.29 9.95 8.55 7.16 6.33 5.55 4.96
31.00 26.50 17.75 20.50 19.62 10.00 9.00
16.00 15.62 11.37 10.62 9.31 6.81 5.62
---------------------------------------------------------------------------
5.3 5.9 5.6 5.8 6.0 5.7 5.4
5.1 6.8 6.4 6.9 6.6 5.7 5.2
1.1 1.3 1.3 1.5 1.6 1.6 1.7
6.8 7.6 10.8 12.6 20.8 14.7 10.0
15.4% 14.9% 16.2% 16.7% 18.4% 13.5% 13.6
9.4% 9.3% 10.1% 9.7% 9.9% 7.7% 7.9
15.7% 17.2% 17.2% 17.6% 18.5% 14.2% 15.1
---------------------------------------------------------------------------
40,407 40,427 40,360 39,050 39,214 39,573 39,476
18,000 18,000 18,000 18,600 13,600 11,600 11,500
</TABLE>
<PAGE> 1
Exhibit (21)
LIST OF SIGNIFICANT SUBSIDIARIES
Cross Creek Apparel, Inc. (incorporated in North Carolina)
Russell Corp. UK Limited (organized under the laws of the United Kingdom)
The Game Inc. (incorporated in Georgia)
IV-13
<PAGE> 1
Exhibit (23)
Consent of Ernst & Young Independent Auditors
We consent to the incorporation by reference in this Annual Report (Form 10-K)
of Russell Corporation of our report dated January 26, 1994, included in the
1993 Annual Report to Shareholders of Russell Corporation.
Our audits also included the financial statement schedules listed in Item
14(a). These schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion based on our audits. In our
opinion, the financial statement schedules referred to above, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in Post-Effective Agreement
Number 1 to Registration Statement Number 2-64496 on Form S-8, Registration
Statement Number 33-24898 on Form S-8, Registration Statement Number 33-47906
on Form S-3 and Registration Statement Number 33-69674 on Form S-8 of our
report on the consolidated financial statements and schedules of Russell
Corporation and subsidiaries included in this Form 10-K for the year ended
January 1, 1994.
/S/ Ernst & Young
Birmingham, Alabama
March 25, 1994
IV-14
<PAGE> 1
Exhibit (99)
PROXY STATEMENT FOR APRIL 27, 1994
ANNUAL SHAREHOLDERS' MEETING
IV-15
<PAGE> 2
(LOGO)
RUSSELL
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
RUSSELL CORPORATION
To the Shareholders of Russell Corporation:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Russell Corporation (the "Company") will be held on
Wednesday, April 27, 1994 at 10:00 a.m., Central Time, at the general offices
of the Company in Alexander City, Alabama, for the following purposes:
(1) To elect four directors to the Board of
Directors for terms of three years each; and
(2) To transact such other business as may
properly come before the meeting.
Holders of the common stock of the Company at the close of business on
March 9, 1994 are entitled to notice of and to vote upon all matters at the
Annual Meeting.
The Annual Meeting may be adjourned from time to time without notice
other than announcement at the Annual Meeting, or at any adjournment thereof,
and any business for which notice is hereby given may be transacted at any such
adjournment.
You are cordially invited to attend the Annual Meeting so that we may
have the opportunity to meet with you and discuss the affairs of the Company.
WHETHER YOU PLAN TO ATTEND THE MEETING OR NOT, PLEASE SIGN AND RETURN THE
ENCLOSED PROXY SO THAT THE COMPANY MAY BE ASSURED OF THE PRESENCE OF A QUORUM AT
THE ANNUAL MEETING. A stamped, addressed envelope is enclosed for your
convenience in returning your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
STEVE R. FOREHAND
Secretary
Russell Corporation
Alexander City, Alabama 35010
March 23, 1994
<PAGE> 3
RUSSELL CORPORATION
- - - - - - - - - --------------------------------------------------------------------------------
PROXY STATEMENT FOR THE ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD APRIL 27, 1994
- - - - - - - - - --------------------------------------------------------------------------------
This Proxy Statement is furnished by and the accompanying proxy is
solicited on behalf of the Board of Directors of Russell Corporation, an Alabama
corporation (the "Company"), for use at its Annual Meeting of Shareholders to be
held at the general offices of the Company in Alexander City, Alabama, on
Wednesday, April 27, 1994 at 10:00 a.m., Central Time, and at any adjournment
thereof (the "Annual Meeting"). It is contemplated that the Proxy Statement and
accompanying proxy will be mailed on or about March 23, 1994.
Shares represented by a properly executed proxy in the accompanying form
will be voted at the meeting and, when instructions have been given by the
shareholder, will be voted in accordance with those instructions. In the absence
of contrary instructions, the proxies received by the Board of Directors will be
voted FOR the election of all nominees for director of the Company. A
shareholder who has given a proxy may revoke it at any time prior to its
exercise by giving written notice of such revocation to the Secretary of the
Company, executing and delivering to the Company a later dated proxy reflecting
contrary instructions or appearing at the Annual Meeting and taking appropriate
steps to vote in person.
ELECTION OF DIRECTORS
The Bylaws of the Company ("Bylaws") provide for a Board of Directors of
not less than nine nor more than 15 members. In addition, the Bylaws also
provide that the Board of Directors shall set the number of Directors within the
specified limitations by resolution adopted by a majority of the entire Board of
Directors and that the Board will be divided into three classes, as nearly equal
in number as possible, each of which will serve for three years. On February 19,
1993, a majority of the Board of Directors adopted a resolution which
established the size of the Board of Directors at eleven members, effective
April 28, 1993. It is proposed to elect four directors to serve until the Annual
Meeting of Shareholders in 1997 and until their successors have been duly
elected and qualified. Proxies cannot be voted for more than four persons. It is
intended that shares represented by the Board of Directors' proxies will be
voted for the election of the following four persons:
NOMINEES TO SERVE UNTIL ANNUAL MEETING OF SHAREHOLDERS IN 1997:
<TABLE>
<CAPTION>
YEAR FIRST SHARES
NAME, AGE AND ELECTED DIRECTOR BENEFICIALLY
PRINCIPAL OCCUPATION OF THE OWNED AS OF PERCENT
OF NOMINEE COMPANY MARCH 9, 1994 OF CLASS
- - - - - - - - - ----------------------- ------------------- -------------------- ------------
<S> <C> <C> <C>
John C. Adams (55) 1991 683,505 (1)(2) 1.72
Chairman President and
Chief Executive Officer
of the Company
Crawford T. Johnson III (69) 1978 12,000 .03
Chairman of the Board
Coca-Cola Bottling Company
United, Inc.
Birmingham, Alabama
James D. Nabors (51) 1988 1,420,832 (1)(2) 3.58
Executive Vice President and
Chief Financial Officer
of the Company
Benjamin Russell (56) 1963 5,927,526 (4) 14.94
Chairman and
Chief Executive Officer
Russell Lands, Incorporated
Alexander City, Alabama
a land and timber company
</TABLE>
-1-
<PAGE> 4
EACH OF THE DIRECTORS NAMED BELOW WILL CONTINUE IN OFFICE AFTER THE ANNUAL
MEETING UNTIL HIS TERM EXPIRES AS INDICATED:
<TABLE>
<CAPTION>
ANNUAL MEETING YEAR FIRST SHARES
AT WHICH ELECTED DIRECTOR BENEFICIALLY
NAME, AGE AND TERM OF THE OWNED AS OF PERCENT
PRINCIPAL OCCUPATION EXPIRES COMPANY MARCH 9, 1994 OF CLASS
- - - - - - - - - -------------------------- -------------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C>
H. Scott Howell (64) 1995 1975 35,901 .09
Retired Executive Vice President
Apparel Group
of the Company
C.V. Nalley III(51) 1995 1989 1,000 -
Chief Executive Officer of
The Nalley Companies,
Atlanta, Georgia
automobile and truck sales
and leasing companies
John R. Thomas (57) 1995 1966 882,633 (5) 2.22
Chairman, President and
Chief Executive Officer of
Aliant National Corporation
Alexander City, Alabama
a bank holding company
John A. White (54) 1995 1992 650 -
Dean of Engineering
Georgia Institute of Technology
Atlanta, Georgia
Herschel M. Bloom (50) 1996 1986 5,371 .01
Partner
King &Spalding
Atlanta, Georgia
attorneys
Ronald G. Bruno (42) 1996 1992 1,200 -
Chairman and Chief
Executive Officer
Bruno's, Inc.
Birmingham, Alabama
retail food stores
Glenn Ireland II(68) 1996 1969 12,946 .03
Investments
</TABLE>
(1) The shares of the Company's Common Stock owned by Messrs. Adams and Nabors
include 26,000 and 25,000 shares, respectively, of the Company's Common
Stock which may be acquired by them pursuant to options granted under the
Company's existing stock option plans described below, which options may
be exercised within sixty days of the date of this Proxy Statement. See
also Security Ownership of Management on page 12.
-2-
<PAGE> 5
(2) Messrs. Adams and Nabors are two of the trustees of the Company's pension
plan which owns 600,960 shares of the Company's Common Stock. As such
trustees, they have the right to vote such shares. These shares are
included in the shares shown as beneficially owned by each of such
persons.
(3) Includes 731,296 shares held by the Benjamin and Roberta Russell
Foundation, Incorporated, a charitable corporation of which Mr. Nabors is
one of seven directors, and 42,995 shares owned by the Thomas D. Russell
Marital Trust, of which Mr. Nabors is one of two trustees, as to which
shares Mr. Nabors disclaims any beneficial ownership.
(4) Benjamin Russell is one of the seven directors of the Benjamin and
Roberta Russell Foundation, Incorporated, a charitable corporation which
owns 731,296 shares of the Common Stock of the Company, which shares
such directors have the right to vote. Mr. Russell is also one of four
trustees of a trust created under the will of Benjamin C. Russell which
owns 3,945,024 shares.
(5) John R. Thomas is a co-trustee with SouthTrust Bank of Alabama, N.A. of a
trust created by the will of Russell Thomas, deceased. The trust owns
311,768 shares of the Common Stock of the Company, which shares are
included in this total. John R. Thomas, while having no beneficial
interest in such shares except as a remainderman, has the right to vote
the shares under the terms of the trust. The present income beneficiary
of the trust is Mrs. Crawford A. Hinson.
Each of the above named persons whose terms expire in 1996 was elected a
director of the Company by its shareholders at the last annual meeting. With the
exceptions of John C. Adams, John A. White, Ronald G. Bruno and C.V. Nalley III,
each of the above named persons has been a director of the Company for at least
the last five years. Except as noted in the remainder of this paragraph, each of
the above named persons has held the same or comparable positions with the
indicated entities for at least the last five years. Mr. Adams was named
Chairman, President and Chief Executive Officer of the Company effective April
28, 1993. He had previously served as President and Chief Executive Officer
since April 22, 1992, as President and Chief Operating Officer since May 6,
1991, as Senior Vice President, Apparel Operations of the Company since July,
1989, and as President of the Knit Apparel Division from 1983 to 1989. John A.
White has served since July 1, 1991, as Dean of Engineering at Georgia Institute
of Technology, having been a member of the faculty since 1975. During the
previous three years he served as Assistant Director of the National Science
Foundation in Washington, D.C. through an Intergovernmental Personnel Agreement
with Georgia Tech. Mr. Bruno was elected Chairman of the Board of Bruno's, Inc.
in 1991. Prior to that time he had served as President and Chief Executive
officer since 1990 and President and Chief Operating Officer since 1986.
Crawford T. Johnson III, is a director of Protective Life Corporation
and Alabama Power Company. John R. Thomas is a director of Alfa Corporation.
Ronald G. Bruno is a director of Bruno's, Inc., SouthTrust Bank of Alabama, N.A.
and Books-A-Million, Inc.
Pursuant to Section 10-2A-52 of the Code of Alabama 1975, a majority of
the Common Stock shares entitled to vote, represented in person or by proxy,
will constitute a quorum at a meeting of the Stockholders. Section 10-2A-52 of
the Code of Alabama 1975 requires that each of the nominees, to be elected to
the Board of Directors, receive the affirmative vote of the majority of the
shares of Common Stock represented at the Annual Meeting as part of the quorum
(including shares which abstain from voting on a matter or which are not voted
on such matter by a nominee because such nominee is not permitted to exercise
discretionary voting authority and the nominee has not received voting
instructions from the beneficial owner of such shares, which abstention and
non-votes, if any, therefore effectively count as negative votes). All nominees
must thus receive the affirmative vote of a majority of the Common Stock shares
of holders who are present, in person or by proxy, at the Annual Meeting.
Generally, brokers who act as nominees will be permitted to exercise
discretionary voting authority where they have received no instructions in
uncontested elections for directors where the brokers have complied with Rule
451 concerning the delivery of proxy materials to beneficial owners of the
Company's Common Stock held by such brokers.
-3-
<PAGE> 6
Should any nominee be unable or unwilling to accept election, it is
expected that the proxies will vote for the election of such other person for
the office of director as the Board of Directors of the Company may then
recommend. The Board of Directors has no reason to believe that any of the
persons named will be unable or will decline to serve if elected.
The Company has an Executive Committee consisting of John C. Adams and
James D. Nabors, which is authorized to act in place of the Board of Directors
between meetings of the Board. The Executive Committee held eighteen meetings
during 1993.
The Company has an Executive Compensation Committee, consisting of Glenn
Ireland II, Crawford T. Johnson III, Ronald G. Bruno, and John R. Thomas, which
supervises the Company's Executive Incentive Program. The Compensation Committee
held two meetings during 1993.
The Company also has an Audit Committee consisting of Herschel M.
Bloom, Glenn Ireland II, Crawford T. Johnson III, C.V. Nalley III, John A.
White, and Benjamin Russell, which recommends to the Board of Directors the
independent accountants selected to be the Company's auditors and reviews the
audit plan, financial statements and audit results. The Audit Committee held
two meetings during 1993.
The Company has a Nominating Committee which recommends candidates for
election to the Company's Board of Directors. The Nominating Committee consists
of Crawford T. Johnson III, Herschel M. Bloom, Benjamin Russell, John R. Thomas
and John A. White and held two meetings in 1993.
During the year ended January 1, 1994, the Board of Directors of the
Company held four regular meetings and one special meeting. Each member of the
Board attended at least 75% of the meetings of the Board and the committees of
which they are members. Members of the Board who are not employees or
affiliates of the Company receive a quarterly retainer of $2,750 and a fee of
$1,600 for each meeting attended. Members of the Board who are affiliates of
the Company, but not employees receive a quarterly retainer of $1,000. Members
of committees of the Board who are not employees of the Company receive $600
per quarter (except the chairman who receives $1,200 per quarter).
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
COMPENSATION PHILOSOPHY AND OBJECTIVES
The Company's shareholders adopted the 1993 Executive Long-Term
Incentive Plan (the 1993 "Plan")on April 28, 1993. The 1993 Plan is a key
component of the Executive Incentive Program (the "Program") which encompasses
all elements of compensation. The goals of the Program are to support our
overall objectives of enhancing shareholder value, maintaining and improving our
quality standards and leveraging our vertical manufacturing strength. This is
accomplished through the following practices:
1) Hiring and retaining the caliber of executive talent needed to
manage the Company currently as well as to position it strategically for the
future. A management team that is both stable and performance-oriented, with a
focus on teamwork, is critical to our success;
2) Having a pay-for-performance philosophy throughout the company that
integrates our compensation program with annual and long-term strategic planning
and that links incentive compensation not only to Company performance but also
to individual and overall market performance;
3) Enhancing the pay-for-performance philosophy by placing a
substantial portion of pay for senior executives "at-risk"; and
4) Establishing the proper mix of program elements to appropriately
balance our financial, quality, customer and strategic goals for both the
short-term and long-term.
The Program is designed to optimize the connection between executive
pay, corporate strategy and return to shareholders. Specifically, the Program is
intended to meet these objectives:
- Establish target awards
- Set corporate and business unit goals in concert with the strategic
planning process
- Communicate award opportunities in advance
- Focus executives' actions on appropriate needs and reward true success
- Motivate participants
The Executive Compensation Committee (the "Committee") believes these
objectives are met by the Program.
-4-
<PAGE> 7
ELEMENTS OF THE PROGRAM
The Program is comprised of the following elements:
Base salaries;
Short term incentives; and
Long-term incentives.
The following describes the elements of the Program, as well as the
1993 Plan, in more detail.
BASE SALARIES
The Company's practice is to target base salaries for executives at the
50th percentile of the market. For salary comparison purposes, the "market"
includes companies in the Company's industry, in similar industries and those
with headquarters in smaller cities. The companies used for this market analysis
of compensation are different than those included in the Value Line Apparel
Index shown in the performance graph contained in this Proxy Statement. The
Committee believes the market for executive talent extends beyond the textile
and apparel industry and includes individuals whose experience includes a
manufacturing focus similar to the Company's. In addition, due to the Company's
location, the Committee does not believe market compensation amounts for
executives should be influenced by compensation at companies in areas with
higher costs of living.
During 1993, the Committee concluded (based on a 1992 study of pay by an
independent consulting firm) that adjustments to its salary administration
practices were needed. Specifically, the Committee implemented a program to
increase executive salaries to market levels, over time. In deciding the amount
of specific increases, factors such as overall responsibility, tenure, internal
equity, market levels of pay and, most importantly, job performance, are
considered. No specific weighting is assigned to these factors.
To ensure that executive salary levels continue to reflect the
Committee's philosophy, the Company intends to periodically conduct similar pay
comparisons. The Committee believes that maintaining competitive compensation
will ensure that the Company has the executive management expertise required for
the future. Considering the entire compensation package, the Committee believes
that targeting base salaries at the 50th percentile of the market is a key
element in the overall program to attract and retain talented executives.
SHORT-TERM INCENTIVE PLAN
The Program is designed to motivate participants to achieve
predetermined goals for Return on Assets Employed ("ROAE") and quality. The
Committee believes the Program's performance orientation represents an
improvement over other plans used in prior years. Specifically, the short-term
incentives include the following elements:
1) As with previous incentive compensation plans, eligible
participants will include not only executives, but also other employees who
fulfill key roles in the Company;
2) Target awards will be established at the beginning of the year to
motivate participants and guide their efforts;
3) Cash awards that reflect ROAE, quality, and individual performance
results for the year are paid after the end of the year.
The plan's financial performance measure, ROAE, is measured at the
overall level for executives in corporate staff and manufacturing positions. For
this purpose, ROAE is defined as (a) net income before taxes and interest,
divided by the sum of (b) assets used in the business.
Executives at the business unit level are measured on ROAE results at
the single business unit level, with a 75% weighting. Based upon their
respective business unit, the executives' remaining 25% of the financial
performance portion of the award either is based upon overall corporate
ROAE results, or upon ROAE results for a combination of select business units.
Awards otherwise earned based upon financial results may be adjusted up
or down by a maximum of 20%, to reflect participants' contributions toward the
Company's quality goals, and also to reflect their individual performance.
Although the plan initially contemplated establishing specific, measurable goals
for quality, the Committee decided it was more appropriate to initially include
quality as a subjective adjustment to awards based upon financial results.
- 5 -
<PAGE> 8
Incentive awards for all the executives named in the Summary
Compensation Table in this proxy statement were based solely upon overall
corporate ROAE results. No adjustments based upon individual performance were
made to the payouts for any of the named officers.
For 1993, overall corporate ROAE performance was below the level at
which target awards would be paid, but above the threshold level necessary for
minimum award payouts. Although ROAE results were above threshold for most
business units but below target, ROAE for some business units was below
threshold levels. Payments made to the named executives shown in the Summary
Compensation Table elsewhere in this proxy statement reflect this result.
LONG-TERM INCENTIVE PLAN
The long-term incentive element of the 1993 Plan includes a variety of
stock based performance awards. The Committee presently intends that long-term
incentives be granted in the form of stock options and, for corporate officers
only, performance units. The Committee intends to balance the short-term
incentive payments with long-term stock options and performance units to reward
executives and key employees when superior returns are provided to shareholders.
With these elements, the Committee believes it has established a strong
link between the participants' long-term financial interests and the long-term
interests of our shareholders in the following manner:
1) Stock Options. Pay will be closely aligned with return to
shareholders since no benefit is received by participants unless the stock
price increases.
2) Performance Units. The long-term incentive element of the 1993
Plan focuses on the Company's Total Shareholder Return ("TSR"), relative to
both a broad market index (the S&PIndustrials) as well as to the Company's
historical performance. TSR includes stock price increases plus dividends,
divided by beginning stock price for the period of measurement. When the
Company's TSR is at the median of the S & P Industrials, and also at a
predetermined absolute level, target awards will be paid.
Stock option grants have been a component of previous incentive
programs. Although a stock option plan was in place for the prior fiscal year,
the most recent grants made were in July of 1991. Under the 1993 Plan, the
Committee has made grants in 1993 at competitive award levels. These awards are
consistent with the Committee's goals for the overall compensation program.
Payment of performance units would be made depending on the measurement
of the Company's TSR over a three-year period. The primary comparison would
focus on the Company's TSR against that of the S &P Industrials Index (the
"Index"). A secondary comparison would focus on TSR for the period of
measurement against the Company's own historical performance.
The first period of measurement for performance units includes 1993,
1994 and 1995 fiscal years. Therefore, the earliest year in which payment of
performance units could occur is 1996. Payments may increase to a maximum of two
hundred percent of target levels if the Company's TSR equals or exceeds the 90th
percentile of the Index.
When the performance at each level is taken into account, the 1993 Plan
provides market pay opportunities if target awards are set at market levels. The
performance factors ensure that above-market pay is only earned for
better-than-average performance and that poor performance earns below-market
pay.
As with the stock option element of the 1993 Plan, the Committee intends
to adjust awards of performance units so that total pay opportunities for both
elements are at market levels.
SPECIFICS OF 1993 CEO COMPENSATION
During 1993, the compensation of the Chief Executive Officer, Mr.
Adams, consisted of the following:
Base salary of $400,000 which was derived by reference to executive
pay at the market companies described earlier in this report. This amount is
still below the median base salary for the market base salary for the market
as determined in the pay study conducted during 1992. Mr. Adams' salary
increase of $50,000 from 1992 to 1993 was intended to move him closer to the
market median amount. Although no one factor was weighted more than any other
by the Committee, this increase generally was based upon the Committee's
assessment of his performance during 1993 and his contributions to the
performance of the Company.
In 1993, Mr. Adams' payout from the annual incentive plan was $131,700.
This was based upon a target award of 60% of salary, and on overall corporate
ROAE results at below target levels (as discussed previously).
-6-
<PAGE> 9
Mr. Adams' stock option grant during 1993 was 14,300 shares.
Mr. Adams also received a grant of performance units at a target award
level equal to 45% of base salary. As discussed earlier, the performance
period over which these units can be earned is 1993 through 1995. Thus, no
payouts were received with respect to performance units in 1993.
The Committee believes these awards will provide incentive for Mr.
Adams to increase shareholder value.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
During 1993, a new section - Section 162(m) - was added to the Internal
Revenue Code that generally limits to $1 million amounts that can be deducted
for compensation paid to executives, unless certain requirements are met. This
Committee has carefully considered the impact of this new provision. Because no
executive receives pay greater than $1 million, the Committee has concluded that
no compensation amounts are nondeductible at present. The Committee will
continue to monitor the applicability of this provision to its programs and will
determine, at the appropriate time, what action it intends to take
Executive Compensation Committee
John R. Thomas, Ronald G. Bruno,
Glenn Ireland II, Crawford T. Johnson III
COMPARATIVE FIVE-YEAR TOTAL RETURNS
RUSSELL CORPORATION, S&P500, VALUE LINE APPAREL INDEX
PERFORMANCE RESULTS THROUGH 1/3/94
<TABLE>
<CAPTION>
VALUE OF $100 INVESTED ON 12/31/88 AT:
12/30/89 12/29/90 12/28/91 1/2/93 1/1/94
<S> <C> <C> <C> <C> <C>
RML $164.13 $144.94 $229.95 $204.53 $186.53
S&P 500 $131.49 $127.32 $166.18 $179.11 $197.00
Value Line Apparel Index $133.98 $109.80 $192.38 $236.44 $177.85
</TABLE>
NOTES
1) Assumes that the value of the investment in the Company's Common Stock
and in each index was $100 on the last trading day preceding the first day of
the fifth preceding fiscal year and that all dividends were reinvested.
2) The Value Line Apparel Index presently includes: Farah, Incorporated;
Fruit of the Loom, Inc.; Garan, Incorporated; Oshkosh B'Gosh, Inc.; Hartmarx
Corporation; Kellwood Company; Liz Claiborne, Inc.; Oxford Industries, Inc.;
Phillips-Van Heusen Corporation; Tultex Corporation; V.F. Corporation; and the
Company.
-7-
<PAGE> 10
SUMMARY COMPENSATION TABLE
The following information is furnished for the years ended January 1,
1994, January 2, 1993 and December 28, 1991 with respect to the Company's Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company during 1993 whose salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------- -----------------------------------------
AWARDS PAYOUTS
---------------------- -------
NAME AND OTHER RESTRICTED
PRINCIPAL ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
POSITION YEAR SALARY BONUS* COMPENSATION AWARDS SAR'S PAYOUTS COMPENSATION
- - - - - - - - - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John C. Adams 1993 $400,000 $137,700 - - 14,300 - -
Chairman, 1992 306,250 100,000 - - - - -
President 1991 251,666 0 - - 11,000 - -
and CEO
James D. Nabors 1993 270,000 67,900 - - 6,400 - -
Exec. Vice Pres- 1992 260,000 85,000 - - - - -
and C.F.O. 1991 233,000 0 - - 10,000 - -
Gerald D. McGill 1993 213,500 53,600 - - 5,000 - -
Exec. Vice 1992 200,000 70,000 - - - - -
Pres. - Manufac- 1991 89,328 0 - - 8,000 - -
turing
J T Taunton, Jr. 1993 155,000 38,400 - - 3,100 - -
Exec. V.P. -
Sales and 1992 110,000 25,000 - - - - -
Marketing 1991 105,000 20,000 - - 5,200 - -
W.P. Dickson, Jr. 1993 165,000 36,200 - - 2,900 - -
V.P. - Human 1992 155,000 30,000 - - - - -
Resources 1991 150,000 30,000 - - 6,400 - -
</TABLE>
*Bonus payments are reported for the year in which related services were
performed.
OPTION/SAR GRANTS IN 1993
The following information concerns grants of incentive stock options
to the named executives for the year ended January 1, 1994. No SAR grants were
made during 1993.
<TABLE>
<CAPTION>
- - - - - - - - - ----------------------------INDIVIDUAL GRANTS------------------------ POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF ANNUAL RATES OF STOCK
SECURITIES % OF TOTAL PRICE APPRECIATION
UNDERLYING Options/SARs FOR OPTION TERM
OPTION/SARS GRANTED EXERCISE --------------------------
GRANTED TO EMPLOYEES PRICE EXPIRATION
Name IN 1993 IN 1993 PER SHARE DATE 5% 10%
- - - - - - - - - --------------- ------------ ------------ --------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
John C. Adams 14,300 6.22 $27.50 7/27/03 $247,247 $626,626
James D. Nabors 6,400 2.78 $27.50 7/27/03 110,656 280,448
Gerald D. McGill 5,000 2.17 $27.50 7/27/03 86,450 219,100
JT Taunton, Jr. 3,100 1.35 $27.50 7/27/03 53,599 105,168
W.P. Dickson, Jr. 2,900 1.26 $27.50 7/27/03 50,141 127,078
</TABLE>
-8-
<PAGE> 11
AGGREGATED OPTION/SAR EXERCISES IN 1993 AND YEAR-END VALUE TABLE
The following information is furnished for the year ended January 1,
1994 with respect to the Company's Chief Executive Officer and each of the four
other most highly compensated executive officers of the Company for stock option
exercises which occurred during 1993.
<TABLE>
<CAPTION>
NUMBER OF VALUE OF UNEXERCISED
UNEXERCISED OPTIONS/SARs IN-THE-MONEY OPTIONS/SARs
SHARES AT JANUARY 1, 1994 AT JANUARY 1, 1994 (2)
ACQUIRED VALUE -------------------------- --------------------------
NAME ON EXERCISE REALIZED (1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - - - - - - - ---- ----------- ------------- ------------ ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John C. Adams - - 26,000 14,300 $216,875 $10,725
James D. Nabors 3,000 $65,125 25,000 6,400 215,000 4,800
Gerald D. McGill - - 18,000 5,000 129,375 3,750
JT Taunton, Jr. 2,000 22,375 13,400 3,100 128,225 2,325
W.P. Dickson, Jr. 5,000 102,500 20,900 2,900 200,063 2,175
</TABLE>
(1) This amount represents the aggregate of the market value of the Company's
Common Stock at the time each option was exercised, less the exercise price
for such option.
(2) This amount represents the aggregate of the number of options multiplied by
the difference between the closing price of the Company's Common Stock on
the New York Stock Exchange, Inc. on January 1, 1994, less the exercise
price for such option.
LONG-TERM INCENTIVE PLAN AWARDS IN 1993
The 1993 Executive Long-Term Incentive Plan provides for the award of
long-term cash incentives to officers of the Company. Performance units may be
awarded based upon achievement of target goals over a three year period
beginning in1993. Performance units were awarded in accordance with the
following schedule:
<TABLE>
<CAPTION>
PERFORMANCE OR
NUMBER OF OTHER PERIOD ESTIMATED FUTURE PAYOUTS UNDER NON-STOCK
SHARES, UNTIL PRICE-BASED PLANS
UNITS OR MATURATION --------------------------------------------
NAME OTHER RIGHTS OR PAYOUT THRESHOLD TARGET MAXIMUM
- - - - - - - - - -------------- ------------ -------------- --------- -------- ----------
<S> <C> <C> <C> <C> <C>
John C. Adams 180,000 1993-1995 $45,000 $180,000 $360,000
James D. Nabors 82,500 1993-1995 20,625 82,500 165,000
Gerald D. McGill 65,100 1993-1995 16,275 65,100 130,200
JT Taunton, Jr. 35,000 1993-1995 8,750 35,000 70,000
W.P. Dickson, Jr. 33,000 1993-1995 8,250 33,000 66,000
</TABLE>
Performance units are earned based upon Company Total Shareholder Return
("TSR") relative to a peer group, the S & P Industrials. Threshold, target and
maximum awards are earned when TSR is at the 33rd percentile, the median
percentile or the 90th percentile of the peer group. Awards earned based upon
relative TSR performance may be decreased by up to 50% if the Company's absolute
TSRfor the performance period is less than a predetermined level.
PENSION PLAN
Officers of the Company are covered by the Russell Corporation Revised
Pension Plan (the "Plan"), a defined benefit plan covering all employees of the
Company. The amount of contributions made by the Company to the Plan is not
reflected in the cash compensation table above, since the amount of the
contribution with respect to a specified person is not and cannot readily be
separately or individually calculated by the regular actuaries for the Plan.
-9-
<PAGE> 12
Benefits under the Plan are based upon years of credited service at
retirement and upon "Final Average Earnings," which is the average base
compensation for the highest sixty consecutive months out of the final 120
months of employment. This compensation consists only of salary and excludes any
bonus and any form of contribution to other benefit plans or any other form of
compensation. Normal or delayed retirement benefits are payable upon retirement
on the first day of any month following attainment of age 65 and continue for
the life of the employee (and his spouse, if any) or in accordance with other
elections permitted by the Plan.
On January 26, 1994, the Board of Directors adopted a supplemental
retirement plan covering any employee's compensation in excess of the limitation
amount specified in Section 401 et seq., of the Internal Revenue Code. This plan
is a non-qualified plan thereby rendering any benefits subject to claims of
general creditors and not deductible until paid.
The following table presents estimated annual benefits payable from the
Plan and the supplemental retirement plan mentioned above upon normal or delayed
retirement to persons in specified remuneration and years-of-credited service
classifications. The amounts shown assume the current maximum social security
benefit and that the employee has elected for benefits to be payable for his
life only.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
YEARS OF CREDITED SERVICE
-----------------------------------------------------
RENUMERATION 15 20 25 30 35 40
-------------------- ------- ------ ------ ----- ------ -------
<S> <C> <C> <C> <C> <C> <C>
$150,000 23,747 31,663 39,579 47,494 55,410 59,535
175,000 27,872 37,163 46,454 55,744 65,035 69,847
200,000 31,997 42,663 53,329 63,994 74,660 80,160
225,000 36,122 48,163 60,204 72,224 84,285 90,472
250,000 40,247 53,663 67,079 80,494 93,910 100,785
300,000 48,497 64,663 80,829 96,994 113,160 121,410
350,000 56,747 75,663 94,579 113,494 132,410 142,035
400,000 64,997 86,663 108,329 129,994 151,660 162,660
450,000 73,247 97,663 122,079 146,494 170,910 183,285
500,000 81,497 108,663 135,829 162,994 190,160 203,910
</TABLE>
Years of service credited under the Plan for individuals shown in the
summary compensation table on page 13 are as follows: Mr. Adams, 17 years; Mr.
Nabors, 25 years; Mr. McGill, 34 years; Mr. Taunton, 18 years; and Mr. Dickson,
18 years.
STOCK OPTION PLANS
The Company has previously adopted the 1978 Stock Option Plan and the
1987 Stock Option Plan (the "Stock Option Plans")pursuant to which the Company
grants to key employees of the Company either incentive stock options ("ISO's")
or nonqualified stock options ("NQSO's"). The term of the options cannot exceed
ten years from the date of grant, and the option price must equal fair market
value of the shares covered at the time of grant. No further options are subject
to being granted under the Stock Option Plans.
The 1993 Executive Long Term Incentive Plan (the "1993 Plan") previously
discussed herein is a flexible plan which will give the Executive Compensation
Committee broad discretion to fashion the terms of awards in order to provide
eligible participants with stock based incentives as the Committee deems
appropriate. It will permit the issuance of awards in a variety of forms,
including: (a) restricted stock (b) incentive stock options (c) non-qualified
stock options (d) stock appreciation rights and (e) performance share and
performance unit awards.
The 1993 Plan provides for the grant of up to 2,000,000 shares of the
Common Stock of the Company and issuance of awards under the 1993 Plan will
cease as of January 1, 2003.
-10-
<PAGE> 13
OTHER MATTERS
The Board of Directors of the Company does not know at this time of
any other matters to come before the Annual Meeting.
PRINCIPAL SHAREHOLDERS
The following table sets forth each person who, to the Company's
knowledge, had sole or shared voting or investment power over more than five
percent of the outstanding shares of Common Stock of the Company as of March 9,
1994.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF PERCENT
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP OF CLASS
- - - - - - - - - ------------------------------ --------------------- ----------
<S> <C> <C>
Edith L. Russell 4,684,320 shares (1) 11.80
P.O. Box 272
Alexander City, Alabama 35010
Benjamin Russell 5,927,526 shares (2) 14.94
P.O. Box 272
Alexander City, Alabama 35010
Roberta A. Baumgardner 8,200,246 shares (3) 20.66
P.O. Box 272
Alexander City, Alabama 35010
Helen Alison 2,064,192 shares (4) 5.20
P.O. Box 272
Alexander City, Alabama 35010
Nancy R. Gwaltney 4,746,940 shares (5) 11.96
P.O. Box 272
Alexander City, Alabama 35010
Ariel Capital Management, Inc. 2,676,100 shares (6) 6.74
307 North Michigan Avenue
Chicago, Illinois 60601
</TABLE>
(1) Includes 8,000 shares as to which Mrs. Russell has sole voting and
investment power, and 4,676,320 shares as to which she has shared voting
and investment power consisting of 731,296 shares held by the Benjamin
and Roberta Russell Foundation, Incorporated, a charitable corporation of
which Mrs. Russell is one of seven directors, and 3,945,024 shares held
of record and beneficially owned by a trust created under the will of
Benjamin C. Russell of which Mrs. Russell is one of four trustees. The
trustees of the trust created under the will of Benjamin C. Russell can
invade the corpus of the trust for the benefit of Mrs. Russell.
(2) Includes 1,251,206 shares as to which Mr. Russell has sole voting and
investment power and 4,676,320 shares as to which he has shared voting and
investment power. See Note (4) on page 3.
(3) Includes 1,459,734 shares as to which Mrs. Baumgardner has sole voting and
investment power and 6,740,512 shares as to which she has shared voting
and investment power, consisting of 731,296 shares held by the Benjamin
and Roberta Russell Foundation, Incorporated, a charitable corporation
of which Mrs. Baumgardner is one of seven directors, 3,945,024 shares
held of record and beneficially owned by a trust created under the will
of Benjamin C. Russell of which Mrs. Baumgardner is one of four trustees,
and 2,064,192 shares held by the estate of J. C. Alison of which Mrs.
Baumgardner is co-executrix.
-11-
<PAGE> 14
(4) Mrs. Alison has shared voting and investment power with respect to
2,064,192 shares held by the estate of J.C. Alison of which Mrs.
Alison is co-executrix.
(5) Includes 70,620 shares owned by the Thomas D. Russell Share A Trust of
which Mrs. Gwaltney has shared voting and investment power, 731,296
shares held by the Benjamin and Roberta Russell Foundation, Incorporated,
a charitable corporation of which Mrs. Gwaltney is one of seven
directors, and 3,945,024 shares held by a trust created under the will
of Benjamin C. Russell of which Mrs. Gwaltney is one of four trustees.
(6) Information contained in Schedule 13G filed with the Company on January
21, 1994. The Schedule 13G states that Ariel Capital Management, Inc.
has sole voting power with respect to 1,774,885 shares, shared voting
power with respect to 302,100 shares, sole dispositive power with
respect to 2,676,100 shares and shared dispositive power with respect to
0 shares.
SECURITY OWNERSHIP OF MANAGEMENT
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP
----------------------------------------
SOLE VOTING OPTIONS
AND EXERCISABLE OTHER PERCENT
INVESTMENT WITHIN BENEFICIAL OF
NAME OF INDIVIDUAL OR GROUP POWER 60 DAYS OWNERSHIP CLASS
- - - - - - - - - --------------------------- --------------------------------------------------------------
<S> <C> <C> <C> <C>
John C. Adams 31,945 26,000 625,560 (1)(2) 1.72
James D. Nabors 20,581 25,000 1,375,251 (2)(3) 3.58
H. Scott Howell 35,901 0 0 .09
Herschel M. Bloom 5,371 0 0 .01
Glenn Ireland II 12,946 0 0 .03
Crawford T. Johnson III 12,000 0 0 .03
C.V. Nalley III 1,000 0 0 -
Ronald G. Bruno 1,200 0 0 -
John A. White 650 0 0 -
John R. Thomas 882,633 0 0 2.22
Benjamin Russell 1,251,206 0 4,676,320 (4) 14.94
Gerald D. McGill 22,000 18,000 0 .1
JT Taunton, Jr. 7,170 13,400 0 .05
William P. Dickson, Jr. 9,439 20,900 0 .08
All Executive Officers and Directors
as a Group (26 persons) 2,482,847 235,042 6,677,131 23.68
</TABLE>
(1) Includes 24,600 shares owned by Mr. Adams' spouse.
(2) See Note (2) on page 3.
(3) See Note (3) on page 3.
(4) See Note (4) on page 3.
-12-
<PAGE> 15
COMPLIANCE WITH SECTION 16(a) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Based solely upon review of Forms 3 and 4 and 5 and amendments thereto
related to the Company's most recent fiscal year, and written representations
from reporting persons that no Form 5 was required, the Company believes that H.
Scott Howell had one late Form 4 filing and Herschel M. Bloom had a late Form 5
filing.
TRANSACTIONS WITH MANAGEMENT AND OTHERS
The Company entered into a fuel supply contract with Russell Lands,
Incorporated on May 21, 1975, under which Russell Lands, Incorporated provides
sawdust, bark, shavings, chips, and other wood materials for use in the
Company's wood chip boilers. The initial term of the contract was four years,
and may be renewed by agreement of the parties from year-to-year thereafter. In
addition, the contract may be cancelled by either party during any renewal
period upon 30 days notice following the occurrence of certain specified
conditions. Benjamin Russell is Chairman, Chief Executive Officer and a director
of Russell Lands, Incorporated, and owns beneficially approximately 70% of the
equity interest in such company. Management believes this contract is in the
best interest of the Company's shareholders. During the fiscal year ended
January 1, 1994, the Company paid Russell Lands, Incorporated approximately
$1,020,000 for wood materials to operate these boilers.
AUDITORS
Ernst & Young, independent accountants, was selected as the Company's
auditors for 1994 after having previously served in the same capacity since
1930. Representatives of Ernst & Young will be in attendance at the annual
meeting of shareholders and will be given the opportunity to make a statement
and to respond to appropriate questions.
PROPOSALS BY SHAREHOLDERS
The next annual meeting of shareholders is scheduled to be held on April
26, 1995, and shareholders of the Company may submit proposals for consideration
for inclusion in the proxy statement of the Company relating to such annual
meeting of shareholders. However, in order for such proposals to be considered
for inclusion in the proxy statement of the Company relating to such annual
meeting, such proposals must be received by the Company not later than November
24, 1994.
-13-
<PAGE> 16
GENERAL INFORMATION
The Board of Directors of the Company has fixed the close of business on
March 9, 1994, as the record date for determining the holders of the Common
Stock of the Company entitled to notice of and to vote at the Annual Meeting. As
of such date, the Company had issued and outstanding and entitled to vote at the
Annual Meeting an aggregate of 39,683,165 shares of Common Stock, each share of
which is entitled to one (1) vote on all matters to be considered at the Annual
Meeting.
As of the date of the Proxy Statement, the Board of Directors does not
intend to present, and has not been informed that any other person intends to
present, any matter for action at the Annual Meeting other than those matters
stated in the Notice of the Annual Meeting. If other matters should properly
come before the Annual Meeting, it is intended that the holders of the proxies
will act in respect thereto in accordance with their best judgment.
In addition to the use of the mails, proxies may be solicited by
personal interview or by telephone or telegraph. The cost of solicitation of
proxies will be borne by the Company. The Company may request brokerage houses,
nominees, custodians, and fiduciaries to forward soliciting material to the
beneficial owners of the stock held of record and will reimburse such persons
for any reasonable expense incurred in forwarding the material.
Copies of the Company's Annual Report on Form 10-K for the year ended
January 1, 1994, in form as filed with the Securities and Exchange Commission,
may be obtained from Steve R. Forehand, the Secretary of the Company, without
charge, by persons who were shareholders beneficially or of record as of March
9, 1994.
RUSSELL CORPORATION
STEVE R. FOREHAND
Secretary
Alexander City, Alabama
March 23, 1994
-14-
